Bechtle Ag

Welcome to our analyst conference on Bechtle AG's third quarter of 2025. Thank you for your interest. Ladies and gentlemen, As you all know, we have had some very turbulent quarters, quarters in which Bechtle's business volume growth was unusually low, quarters in which our earnings were below those of the same period last year. Although the reasons were understandable, the situation was nevertheless unfamiliar and unsatisfactory for all of us. Today, however, we can look back on a quarter in which the signs are finally pointing in the right direction. Business volume, revenue, and earnings are up and have improved year on year. Is this the long-awaited lasting turnaround? I don't want to dampen the excitement right at the start, but unfortunately, we won't be able to answer that question definitively today. However, we will take a closer look at where the improvements in the third quarter came from and why we're optimistic about Q4. As usual, today's presentation is divided into three main sections. As usual, we start with the more detailed look at our key economic indicators for the third quarter and the first nine months of the 2025 financial year, both at group level and at segment level. This will be followed by some important strategic events beyond the figures that are important for the future of the company before we end up with the outlook for 2025 and the end of the year, so the next few weeks in fact. But first of all, Let's take a look at business development. Ladies and gentlemen, the third quarter saw encouraging developments. You will no doubt have seen the figures in our press release earlier today. However, this does not mean that the all clear can be given across the board. We still see regions and areas where we face major challenges. Unfortunately, the overall economic conditions have not yet improved significantly and in all regions. But with growth in all relevant KPIs, we have taken an important and significant step in the right direction. Our top line has grown and we have repeatedly emphasized that stronger growth is also an important prerequisite for improving our earnings. In addition, we have also been able to rein in cost growth, resulting in EBT growth in Q3 for the first time in five quarters. Let us now take a look at the aforementioned top line development, that is business volume. At 8.4%, business volume growth is once again in the high single-digit range and thus within our long-term target range. In purely organic terms, growth amounted to 6.2%. This chart clearly shows the positive development over the course of the year. We have grown from quarter to quarter. And allow me to make a small side note. For the first time ever, we exceeded the 2 billion euro mark in business volume in the third quarter. It is this positive trend in particular that makes us confident about the fourth quarter. For the segments in the regions, this means the following. Our international performance is particularly impressive in my view. We achieved growth of no less than 17% here and in organic terms the figure is still almost 12%. These figures clearly demonstrate that our international M&A strategy was the right one. It has broadened our footprint and significantly reduced our dependence on economic ups and downs in individual countries. especially the markets in Belgium and the Netherlands, the United Kingdom and Spain have developed very positively. And it is no coincidence that these are precisely the countries in which we have strengthened our position through acquisitions in recent years. We have thus not only strengthened our existing business activities in these countries, but also used a multichannel approach to tap into new customer groups and support our existing customers with a broader service portfolio. Let's now take a look at revenue. At first glance, the picture is not surprising. Due to the application of IFRS 15, you're familiar with the context, revenue is lower than business volume. However, we can also see that the discrepancy between business volume and revenue is not quite as pronounced as it was in the past. This is not because our software business has become less successful, but rather because our customers increased their investment in the replacement of their client infrastructure in Q3. In the end, we don't always know with certainty why a customer chooses to invest in their infrastructure. However, one possible driver in the past quarter may well have been the switch from Windows 10 to Windows 11. Our internal analysis of these developments is still ongoing. The revitalisation of our trading business is also an important factor when considering the earnings side, that is EBT. Our EBT grew by 2.4% year on year in the third quarter. That is certainly no reason to get overly excited just yet. But, ladies and gentlemen, after five quarters of declining results, it is indeed very positive news that we are back on the growth path with our earnings. Even more remarkable, however, is the momentum we saw over the course of the quarter. Compared to Q2, we have improved our earnings by over 20%. The swing amounts to almost 23 percentage points. If we continue to see comparable momentum in the fourth quarter, we will achieve our guidance for the full year 2025. There are two main reasons for this positive development. One, Due to increased hardware sales, we were more successful than in the first half of the year in obtaining vendor bonuses and kickbacks. And two, the increase in costs was very moderate. Other operating expenses increased at a lower rate than revenue did. And personnel costs in the third quarter were below the level of Q1. And so, to conclude our review of the key figures, the obligatory glance at the operating cash flow. Cash flow 2 developed very positively in the third quarter. It stands at almost 125 million euros, reflecting the usual seasonal trend at Bechtle. Not only do we see a clear improvement over the course of the year, we're also within striking distance of the already very strong quarter last year. It is remarkable that we were able to achieve this level despite the upturn in our operating business, especially in September. Normally such developments are also reflected in cash flow, albeit with higher receivables and inventories on the reporting date, which have a negative impact on this key ratio. This reflects the success of the measures we have implemented in recent years as part of our working capital management, enabling us to better buffer operational cash flow growth, so to speak. So let us now turn to our workforce. As of the 30th of September 2025, Bechtle had 16,300 employees. That's 692 people or 4.4% more than in the same quarter of the previous year. This increase is exclusively due to acquisitions. The acquisition of Grupo Solucia in Spain alone brought 646 new colleagues to the Bechtle Group. In purely organic terms, the number of employees fell by 1.6%. It remains a deliberate management decision not to expand the workforce further in these challenging times. We are currently relying on natural attrition and are not immediately refilling vacant positions. However, we continue to invest consistently in the training of young people. We are therefore very pleased to have welcomed 251 young colleagues at the start of the 2025 training year. As of the 30th of September, a total of 853 young people were in training at Bechtle. And so, as is customary at this point, let us turn to what we consider to be the non-financial significant events of the third quarter of 2025.

These latest announcements are all forward-looking and underline Bechtle's future viability. So, this time we look ahead to an important personnel change, two acquisitions, and a perhaps rather surprising announcement on the subject of digital sovereignty and a milestone in our sustainability strategy. Well, let's start with a personnel change. At the beginning of this week, we published a statement that replaces the question mark behind my succession with an exclamation mark, if you allow me to put it like this. My fellow board member, Konstantin Eber, is to take over my position as CEO at Bechtle from January 2027 onwards. Together with the nomination of Chris Yehle as CFO on 1 January 2026, my succession has thus been settled for the long term and early on. It was important to the Supervisory Board and to me that the transition could take place calmly and according to plan. We have now created the conditions for this. And in doing so, we are once again underlining Bechtle's reliability, both internally as an employer, towards our customers, but also towards the capital market. And just to anticipate any questions you might have, my contract runs until the 31st of December 2026. And until then, I will continue to work with the same energy and discipline, full conviction and enthusiasm for Bechtle. Let's now take a look at our international acquisitions. With Novo Makut Automazione, Bechler has acquired the largest partner for SOLIDWORKS in the Mediterranean region. The company was founded in 1995, is headquartered in Bologna and has seven other locations in Italy's most economically powerful regions. The company employs 149 people and it has achieved a business volume of over 63 million in the past financial year. The CAD and PLM specialist is the market leader in Italy and counts around 5,000 predominantly mid-sized companies from the manufacturing industry among its customers. This is an important step for our European positioning in the PLM solution business. We've also acquired the Dutch IT service provider ITAM Solutions, based in Eindhoven. Founded in 2007, the company specializes in IT asset management solutions and offers its customers comprehensive consulting services for cloud cost management. Datum Solutions employs 38 people and achieved a business volume of 4.4 million in the past financial year. The specialist has already been fully integrated into our subsidiary PQR. This brings us to the topic of digital sovereignty, which is currently a subject of intense debate throughout Europe and Germany in particular. In this field, which is important for the future of all of us, we have broken with our previous strategy of not entering the market as an early adopter by developing a software-based measurement method for assessing digital sovereignty, a measurement method that does not yet exist in this form. The Bechle Index of Sovereignty is designed to help business and public sector organizations to determine the maturity level of their digital sovereignty in a structured manner and derive concrete measures based on the results. The Bechle Index of Sovereignty will be rolled out in the first quarter of 2026 and is currently truly unique in the IT market. The Bechtle Index of Sovereignty focuses on the dimensions of data ownership, technological independence, and strategic autonomy. The benefits for the customers are, amongst others, that they gain transparency around potential dependencies, they can identify risks that compromise independent decision-making and action, and they can take meaningful steps to strengthen their digital sovereignty over the long term. Finally, let's take a look at our activities in the area sustainability. We have now received official confirmation from the Science-Based Target Initiatives, SBTI in short, that our net zero targets meet the criteria of the SBTI. Following the validation of our near and mid-term climate goals earlier this year, our recently submitted long-term net zero targets for 2050 have now also been assessed and approved in line with scientifically recognized standards. With its net zero targets, Bechtle commits to reducing absolute greenhouse gas emissions across Cope 1 and 2 by 90 percent by 2050 and In the relevant areas of Scope 3, the company aims to cut emissions by 97% per €1,000 of value creation, and remaining emissions are to be neutralised. The key levers for decarbonisation are the areas of energy, mobility and procurement. The validation of the 2050 targets underlines Bechtes' long-term commitment to climate protection and sustainability along the entire value chain. This brings us to the outlook, ladies and gentlemen. Well, the overall economic situation remains tense. In our largest national markets, Germany and France in particular, we are still seeing a certain reluctance among our SMB customers to invest in IT. We are also seeing an upturn in business with our public sector customers and higher demand in our traditional e-commerce business. During the third quarter, this upturn was particularly strong in September. And according to the first operating figures available for October, this positive trend is continuing. And this also goes for November. In concrete term, this means for Outlook, In terms of business volume and revenue, we are on track with our guidance for the full year after nine months. However, we still need to catch up in terms of EBT. And of course, we know that the required EBT growth of at least 25% in the fourth quarter is ambitious indeed. with the momentum like we saw in the third quarter that is achievable. The swing of around 23 percentage points that we saw in Q3 is exactly the growth that would help us to achieve our guidance in the fourth quarter as well. And we've already proven several times in the past that we can deliver a strong finish. We are therefore confident that we will be able to achieve our EBT target within the specified range. And in this respect, we are once again confirming our guidance from March 2025. That, ladies and gentlemen, is all we have to say about our performance in the third quarter of 2025 and the outlook for the fourth quarter of 2025. Thank you very much for your attention, and I'm looking forward to your questions.

Ladies and gentlemen, we will now start the Q&A session. If you want to ask a question, please press star and one on your telephone. If you want to withdraw your question, please press star and two. We'll start with the questions from the German room. Just bear with us, please. The first question is from Florian Kepler-Chevreux. Good morning, Dr. Orlemans. I have two questions. First of all, coming back to the public sector, You said that you see positive signals here. Can you tell us a little more about that? What segments are we talking about? Who are the players? Does this include municipalities or is it the federal level? Some changes were announced already in March. So maybe you can speak a little bit about the current development of tenders. And has anything major changed in the month of September as far as tenders are concerned? We saw a positive development of order intake and an increase of 17%. So, can you tell us more about what your confidence is based on? Well, thank you very much for your question. Now, on the public sector trends. Well, first of all, This is just a preliminary remark. The public sector is made up of different sub-segments in our case. In our calls, we don't go into too much detail usually, and this is why I would like to stress this at this point, because we usually... only speak about the big customers like the Ministry of the Interior with a big procurement department or the Federal Armed Forces. But in our case, healthcare plays an important part as well. And here we have municipal and regional lender-based clients as well. We had one important project from healthcare where we saw disproportionate growth year on year and we see double digit growth for example in our business with EU institutions too and also in the area of international chamber of commerce and trade and in addition, And that brings me to the second part of your question. The larger framework agreements also drive our business. And first and foremost, the project with the Federal Armed Forces which is significantly involved in order intake increase because we're not just talking about the hardware business here, but also services which we can deliver in this context. And this specific combination, not just infrastructure business, but infrastructure business in connection with service and network business means that It takes longer to ramp up the project, so run-up time is longer and these projects are on our books for a longer period of time and that explains the current situation why order intake in our case grows faster than revenue because of the specificities of the business and longer run-up times. And as far as tender activities are concerned, we currently do not see any disproportionate growth here, but no decrease either. It's still fair to say that, and this brings me back to what your question is probably about, infrastructure business and budgets. The effect has not shown itself yet, I would say, so of course everybody is hoping for this big wave that will come not just in our industry but under other industries as well. So we're still waiting for this wave. It has not shown any impact on our figures and the numbers you see is based on the tenders we won in the past. Thank you. Next question is by Martin Jungfleisch, BNP Paribas. Good morning. Congratulations on your numbers. Now, I've got a question on the outlook. Can you explain what you refer to when you said there are some difficult areas and what needs to happen for profitability to improve? Is it the public sector business or is it macro conditions that need to improve? Thank you, Mr. Jungfleisch. You basically answered your own question. So in our case, How to put this? The more challenging areas are clear, both in the positive and negative sense. I already mentioned some positive ones in my remarks. We see country markets in UK, Benelux, Spain, to name but a few, where the trend is very positive. But on the other hand, We have countries like France and Germany, our biggest volume markets, that do not develop like we would have expected based on previous years. And this, of course, is linked to the economic situation in these countries because any overarching technological reasons simply are not present. The Windows 10 to Windows 11 migration, for example, just to give you an example, is not a specifically German or French issue. So from a technological point of view, there is no reason why a business should be better in some countries than in others. So we're still facing our problems on the difficult macroeconomic situation in these countries and this has an impact on IT demand. And to come to the second part of your question, this also means that visibility is impacted and you will have seen that in recent days. It's very hard to make any forecasts for the future. Well, we would say that as soon we see that our public clients go back to their normal spending behavior, visibility will go up. And this is not something we've seen in the past two years at all. If I may remind you, last year, we saw the end of the federal government and very late approval of the national budget. As you know, and then in the current year, it was still very difficult to launch any projects. So that situation lasted until September. And October was also quite reluctant. So visibility basically is correlated to the stable demand from our public customers who, of course, make up 40% of our business. Thank you. And the second question that I have is on Q4. You said? that you saw further improvement in October. Can you tell us a little bit about the growth rates in October? Was there an improvement over September? So, can we assume that the growth rate would be above the level of Q3? And another question on EBT. EBT went up disproportionately. Is this volume driven? Or is it also because of back-end payments in Q4. Let me start with the second part of your question. In Q3, we saw very positive development of the back-end margin because of reluctant growth in Q1 and Q2. We took the hurdles a little later. than usual. So it is correct to say that Q3 growth, which was much stronger, of course, it helped us, of course. And you might even say that this was still a pent-up effect that we benefited from after the sluggish development of the first half of the year. Going forward, looking at Q4, what we need in terms of EBT growth is clear. According to our guidance, we need the same overperformance as in Q3. So we're still confident. That remains unchanged and the month to date development in November is also very good and it continued the good development in October where order intake saw double digit growth again and again also more significant growth than in business volume but You have to take this with a pinch of salt because this is not consolidated as a figure. So just please consider this a statement from me concerning a certain trend. So in operational terms, we could say that we're at the level of Q3, which means that we remain on track, well on track to achieve the top line and bottom line growth that we need in Q4 to achieve our guidance. Mr. Jungfleisch, you've been following us for long enough to know that what I'm going to say now is obvious. December is going to count this year, but even more so this year than in previous years, because and You need to admit that December last year was strong already. Q4 last year, if you recall, we had a bottom line result which was around 40 million, so That is quite something. That's a figure we need to compete against, so to speak. But the basic preconditions are there. We see some pent-up effects. And I have to point out that in December, we usually also have to consider the readiness to deliver from our vendors because volumes play an important part and it's going to be important in December to make sure that our vendors are able to deliver. We worked very hard in recent weeks as part of the existing framework agreements. We updated our portfolio and our goods baskets were changed so that they match the expectations of our customers. And now we have to generate order intake and then be able to deliver. Thank you very much and all the best. Thank you.

The next question comes from Nicole Winkler from Birnberg. Yes, one additional question, please, as regards to business in Germany. I'd like to understand, I mean, yesterday one of your competitors published their figures, slightly positive business year over year. So, I'd like to understand why your business in Germany is not positive yet. Well, first of all, what's right is that the essential growth in our case, top line, is driven by our international business. Well, let me put it like this. Germany is not where we've seen it in the past in terms of growth. In our case, I've just explained it independent of the tricky economic situation in the SMB sector. This was mainly due to the public sector business. In the third quarter, we've seen very few weeks where the public business was at the level which we were used to in average in the previous years and quarters and that's how we distinguish ourselves from other competitors whose public sector business is considerably lower. The public sector share of the competitors is something I'm not familiar with but I know ours and that's about 40% and that explains why the demand of the public sector affects us so strongly. And since they were rather hesitant That explains why we can't achieve major growth rates different from what we see abroad. Quite frankly, this is less cause for concern because we know exactly why this is the case. We see first moderate signs of recovery. I've mentioned this for the S&P sector and the client field in particular. This is a business which developed rather difficult in the past weeks. Maybe the switch from Windows 10 to 11 played a major role and now we see a ramp up and normalization type of demand from our public sector business. So it's fairly clear what will happen in the future where things have to change so that we have a true opportunity to reach our guidance. Yes, it is ambitious indeed, but if you check it, not only in line with the growth that is required to achieve our guidance, but also if you ask the questions I mean, you know that our business is quite seasonal across the different quarters and the different quarters contribute differently to the overall annual results. And if you check that and if you see that if our expectations in terms of fourth quarter come true, You can see that the fourth quarter usually contributes 38% to the overall years, and we had years where the fourth quarter contributed 40% to the overall annual performance. So it is ambitious, but it is possible. Thank you very much indeed. So if you want to ask a question, please press star and 1 on your telephone. The next question from Lars from Deutsche Bank. Thank you. Good morning, Dr. Olmertz. Good morning, dear Belter team. Two brief questions. First, what's your current assessment of regarding the pressure from your competitors? Is there still a battle for market share? And another question related to your framework conditions above all the German ministries. Have first call-offs started from the well-known Apple-Indigo contract? Yes, thank you, Mr. Van Cleef. Well, this is a question which we asked ourselves every single day over the past weeks. Yes, the contract is ramping up, so to speak, but... We see a major delay between incoming order and revenue. And the reason for that is that it's not only infrastructure which we supply, but this infrastructure is combined with a number of services which we have to write on site. We see a greater delay here or greater gap between order and revenue. But incoming order, if you let me refer to that, shows a clear indication that things are going up. Well, competitive pressure remains unchanged, very high indeed. But in two areas, particularly high. Interestingly enough, In some international markets, it's particularly high. We are fighting at the front end, the front end margin, not only the back end margin. You can see this if you look at the profitability of the two segments. If you look at that, you can see that Our position is more difficult abroad. We assume, however, that the situation will improve towards the end of the year. And there's a second area, which we also touched upon briefly during the calls. That's our Microsoft business. You know, the changes from Microsoft in terms of incentives of enterprise agreements versus CSP agreements that has major implications on our P&L. We've been able to tackle that quite well and the impact on our earnings was below 1 million net. in net terms if I allocate all the funds not only just on front ends but also on the back end margins but the migration from enterprise agreements to CSP agreements has a negative effect on the margin because all our competitors are faced with the same problem. and that is to migrate these agreements from one form to the other. And that is why the competitive pressure in this part of the business is particularly high and also impacts the margin. In the classical infrastructure business, we see a stable First profit margin above all in the larger volume business. In Germany in particular, the margin is very stable and also due to the increase in growth, we see that the back end margin follows along the same line. So in view of the cost situation, we are very happy with the overall development. And comment from my side. Internationally, the competitive pressure is higher. That is something you don't see so strongly because, well, we are reporting according to the old segments for the last time. So internally, we switched, and as of the next annual statement, we will report in regional segments, Germany, France, Benelux, and rest of Europe. These will be the segments. presumably. Perfect. Thank you.

We have the first question coming from Barat Nagaraj from Cantor Fitzgerald. Please go ahead, sir. Mr. Nagaraj, your line is open. You can ask your question. Mr. Nagaraj, you can ask your question now. We go ahead with the next question from Christopher Tong from UBS. Please go ahead.

Hi. Morning, everyone. Thank you for taking my question. Maybe just one from me on sort of incentives. So I guess Cisco is changing their incentive program, and we see that Broadcom is pushing services to its partners. Can you just talk about what you're sort of seeing on the incentive front across your portfolio for sort of next year? Thank you very much.

Yeah, you're absolutely right. Cisco and Broadcom will change the program starting, if I'm informed right, next year. What I can tell you is that we are actually in really in-depth discussion with both of the vendor partners because we do have a really strong footprint in Cisco and Broadcom VMware as well. And right now we don't know exactly what the impact will be, but on the background of our really strong position at the vendors, we are confident that we could benefit from the changes which we might see starting next year. But it's too early really to give you some reliable figures.

Yeah, got it. Thank you.

As a reminder, if you wish to register for a question, please press star followed by one on the telephone. There are no more questions at this time. I would now like to turn the conference back to Dr. Thomas Ullematz for any closing remarks.

Okay, thank you very much, ladies and gentlemen, for your interest in Bechtle, for your interest in our development in the fourth quarter. Thanks again for your questions as well. I wish you a nice day and already a nice weekend. See you.

Ladies and gentlemen, the conference is now over. Thank you for choosing Kosovo and thank you for participating in the call. You may now disconnect your lines. Goodbye.