Bechtle Ag

Ladies and gentlemen, a very warm welcome to the Bechtle AG's conference call. We would like to point out that you are in a listen-only mode, and the session is being recorded. After the presentation, you may ask questions. If you'd like to ask questions, please press the star key followed by zero for operator's assistance. If you need operators assistance, please press star key followed by zero. Now I'd like to turn the conference over to Dr. Thomas Olemotz. Yes, thank you very much and welcome to our press and analyst conference for the Bechtle AG second quarter and first half of 2026. I'm very delighted by your interest shown in our conference call. Certainly, you've all seen our ad hoc announcement of July 28th, in which we already announced the key figures for our operational performance in the second quarter and, in particular, an increase in our guidance. Today, we would like to take a closer look and analyze this very positive development in greater depth. Because I would like to say something upfront, the framework conditions have not improved. They remain challenging. Despite these challenging conditions Bechtle has performed very positively. We have a traditional proximity to our customers and a close partnership with all relevant technology vendors and this is paying off. Our business model is broadly diversified geographically and also across customer groups in our portfolio and this contributes to our success that we would like to talk about today. Let us have a look at our agenda. We have three main sections. We're going to start with an intense, more detailed look at our business performance and development and the key figures of the second quarter of the current fiscal year and also the first half of this year. And this will be presented to you by my colleague Christian Jehle. The second part is going to Thank you very much. Thank you, Dr. Olemotz. Well, Q2 saw double-digit year-on-year growth in almost all relevant key performance indicators.

This shows that Bechtel continues to manage the storage crisis very successfully. The customers still have a very high demand for consultancy and support discussions and the encouraging performance is broadly supported across all customer segments and also across all regions. And we've also been successful in terms of cost management and as a result, gross margin and EBT margin remain stable. Let's first take a look at the trend in our order intake and order backlog. Order intake Thank you very much. On the one hand, we have longer delivery times for certain hardware products, in particular service and storage. And the project startup sometimes takes longer due to the need for discussions regarding increased prices or the allocation of the available IT budget. Let's now look at our top line performance. Business volume rose by 18%. Organic growth was also very strong at 13% and part of the growth was driven by higher hardware prices and sales also performed well, driven by a higher proportion of hardware. Nevertheless, software has also recorded consistently high growth and organic sales increased by 10%. So overall, a very strong performance from Bechtle at top line. Let's now look at the performance over the course of the year. If you look at the two quarters, we can see that momentum picked up in the second quarter, but price effects are also playing a role here. June in particular was very strong. Discussions with customers to initiate projects are currently rather long drawn out compared to the past, though some were successfully concluded in June. For the first half of the year, business volume stands at 15%. Thank you very much. So, we have a very sound and broad basis. It's not driven by individual segments. France continues to perform well, albeit at a lower level. And other Europe, we see a key growth driver at 51%. This includes growth from M&A in Spain, Italy and Portugal. But we also see strong organic growth at 22%. The good news here is, as I've said before, growth is broadly supported by all customer segments and all regions, which is a clear indication of a sustainable trend. And I'm sure you followed the press releases, and if you look at the growth of our competitors, the smaller and the bigger ones, and if you focus on Germany, well, we can safely say that we have gained market share above all in the first quarter. This brings us to the earnings performance. If you look at the earnings, we can see that gross margin remains at a high level. So we are still able to manage the current difficult situation effectively. And Dr. Olemotz has mentioned the difficult situation. Cost of materials shows slightly disproportionate increase, but gross margin remains at a high level. This, of course, reflects our successful cost management. Let's look at the trend in operating profit. EBT is also seeing double-digit growth in the second quarter by 20%, which means that the first half year increases 16%, which is well above our previous expectations, further reasons for the forecast upgrade. The stable gross margin is the basis, but cost management measures are also having a positive impact. So, in a nutshell, the positive message here is the EBT margin remains stable. Now, let's look at the different segments. Here too, growth is broad-based with all segments showing strong growth. So, particularly strong in the segment Other Europe. This is not only driven by acquisitions, but also by very good Thank you very much. Operating cash flow was under pressure in Q2. The reasons are obvious. Operative cash flow reflects our strong operational performance, and as I've said before, June in particular was very strong, hence significant defects relating to the reporting date. On the one hand, order-related inventories rose, and on the other hand, contract assets plummeted. Thank you very much. Thank you. So, all in all, we are fully confident and assume a positive trend in OCF for the financial year 2026. So, let's look at our employees now. Thank you very much. Let us now turn as is customary to look at our non-financial special events. I shall hand back to Dr. Thomas Olemotz.

Thank you, Christian. The following selected current updates show examples, just examples that contribute to our sustainable and profitable growth. We will have a look at a successful acquisition, three important milestones in our AI activities. A sales success in our public sector business, a very successful capital markets transaction, and last but not least, another step in implementing our sustainability strategy. Let us start with M&A. With the acquisition of Interforce that we've already announced, we are once again expanding our market presence in the Netherlands. Interforce is one of the established managed service providers for medium-sized companies in the Netherlands and employs 38 people. Interforce's business model is based on a high degree of automation, and this explains the relatively low number of employees, and it focuses on integrated cloud and managed service solutions for small and medium-sized customers. With this acquisition, we strengthen our own managed service offering portfolio, further increase our share of recurring revenue, and we gain an experienced team with strong technological expertise. The plan is to bring Interforce a standardized solution also to other European country markets in the future. Let us now focus on three particular success stories in our AI business. First, we are expanding our cooperation with NVIDIA, and this strengthens our position as a provider of AI infrastructure. We're achieving the highest partner level with NVIDIA, and this confirms Behle's comprehensive expertise in designing, deploying, and scaling high-performance AI solutions. Second, Together with Dell and, yes, NVIDIA again, we're also opening a central Dell AI factory, which will include a demonstration and proof-of-concept environment, as well as a competence center for consulting and workshops. The aim is to help customers with validated reference architectures to bring AI into productive use more quickly. A remarkable success has also been achieved by our subsidiary, Planet AI. This is our AI research and development company, and it has won the world's most demanding competition for document-based AI systems. Planet AI came in first, both in the overall ranking, but also in seven out of eight competition categories. Quite impressive. Let us now have a look at our public sector business, ladies and gentlemen. In the second half of the year, this will be especially critical for our business performance. Bechtle has been awarded the contract by the Bavarian State Ministry of Justice for the operation and further development of central IT services. The framework agreement centers on the operation of the central bi-tech This is essential for digital workplaces and IT services for the Bavarian justice systems. Managed services, project and consulting services, and provision of IT hardware are included in this framework agreement. The contract commences on January 1, 2027 and has an initial term of six years. The maximum contract volume amounts up to 250 million euros. This project also includes the support of two data centers and 220 locations in Bavaria with a total of more than 17,500 IT workplaces. This is a long-term contract. And through this, Bechtle will support the courts and public prosecutor's offices in Bavaria to further advance digitalization and providing employees with a secure, modern and high-performance IT working environment. But also on the capital market, as I already announced, we've been quite successful. In May and June this year, we successfully placed our second promissory note transaction since 2018. The demand was very high, so the originally target volume of 250 million euros was increased to 450 million. The order book was oversubscribed several times and was closed early for new orders. In the final, the binding phase, the order book was approximately 3.5 times the original target volume. A total of 84 domestic and international investors participated in the transaction. The promissory note bonds have maturities of three, five and seven years in six clusters. This is how they were issued. And with this transaction, we're optimizing the maturity profile of our financing structure and we're strengthening the company's long term financing. particularly with regard to our M&A strategy. Last but not least, let us have a look at some progress with regard to our sustainability strategy. Bechtle AG has joined the Responsible Business Alliance as an affiliate member. This supports the vision and objectives of one of the world's largest industry initiatives for promoting social, environmental, and ethical standards in global supply chains with a focus on electronics and IT industry. By joining this alliance, we commit to progressively implementing the code of conduct of Responsible Business Alliance in our own business processes and also to Involving our direct suppliers in compliance with these requirements. Dirk Muller-Niessner as well as the growth expectations for the IT markets in Germany and France. However, the first half of this year was extremely successful. We have a record order backlog ahead of us, so we look confidently towards the second half of this year. So what does that mean specifically for our outlook? We are raising our guidance from March 2026, our forecast, The demand for future-proof IT solutions and the corresponding consulting services remains high, and our proximity to customers is a major asset here. In the public sector, we expect a seasonal pattern and further positive momentum in the second half of the year. We know that in the second half of the year, and particularly in the fourth quarter, we're facing very high comparative figures. Nevertheless, we're convinced that we can maintain our successful course. For the overall fiscal year, we expect a business volume growth of more than 10% and revenue and EBT growth in the range of 5 to 10%. The EBT margin is expected to decline slightly, mainly due to investments in our own IT infrastructure. Ladies and gentlemen, This concludes the review of our performance in the second quarter and first half of 2026 and our outlook for the remainder of the fiscal year 2026. Thank you very much for your attention. And now I'm happy to take any of your questions.

Ladies and gentlemen, we now start with the Q&A session. If you want to ask a question, please press star and one on your phone. If you want to withdraw your question, please press star and two. For question, please press star and one. We start with question from the German room. The first question comes from Andreas Wolf Berenberg. Yes, great. Thank you. And congrats to this strong quarter. Three questions. The first. Organic growth in the second quarter was double digits, very strong, but the organic development of employee development was flat. What are the cost expectations here? So, the ratio of hardware prices to your revenue development, can you comment on that? And the third question refers to the public sector. Do you see new tenders due to the increase in hardware prices? Thank you, Mr. Wolf, for the questions. Let me start and then my colleagues will add details. As regards organic growth, indeed, the second quarter was extremely strong and you've seen it. We had a close tap on the costs. That is why we don't expect significant cost increases for the remainder of the year. If we show an increase in employee costs, that's due to the variable part of the remuneration and the provisions necessary for that. If we continue the same performance throughout the remainder of the year, then, of course, our sales colleagues will want to have a share in that. and we have the provisions on a monthly basis and that might mean that for the back end of the year embryo costs will increase. We don't assume however that we'll see an organic increase in head count for the remainder of the year. If the number of FTEs increase then that's Thank you very much. You can't distribute it equally across all product groups. There are certain product groups where we grow both in terms of volume and price. And there are other product groups above all where the shortage is biggest, where we see tremendous price increases. And we expect further in the back end of the year. And what's really strange about the situation, we have other product groups where prices drop. So, we have a rather complex situation if you look at the price development at product level, something we haven't had like before. Usually, these effects are aligned during these phases and the reason why this is different this time is simply The supply chain restrictions, which is different across the different product groups. But the price effect is an essential driver here. As regards the development of the public business, we generally report about tender we've won once they exceed a certain level. I've already mentioned it in my explanations for us. The development in the public sector business sees a usual seasonality and I mean you've been following us for years or even decades so you're aware of the seasonality in the public sector and that's decisive for the performance of the second half year. We expect this to continue the public sector business In Germany and abroad has developed solidly. We didn't expect more for the first half year. And for the second half year, we expect growth rates to increase above all in the fourth quarter. And we need this because you know that year on year, we have a very strong effect above all in December because from today's point of view, there are no reasons to doubt Thank you very much. The customers need to be flexible in terms of manufacturers. Some produce more and others less. But that's just the usual fluctuations we see here. So we don't see any special effects for the second half of the year and that is why we are rather bullish in the assessment of the development. Thank you. Next question, Florent Dreisch, Kepler-Chevreux. Good morning, gentlemen. One question regarding the non-public sector. I mean, you've clearly indicated that Germany and the public sector are successful here. But if you look at the H1 figures, the non-public sector dropped year on year in terms of revenue. Was Q2 better than Q1? And do you expect a recovery? In H2, and the second question refers to pricing. If you look at the guidance, 5% to 10% revenue, and you said more than 50% is driven by pricing, and you also said that the pricing continued to increase, is that ambitious to look at the low edge of the new guidance, or is 10% or even more to expect it because we see this tailwind by the prices. Dear Mr. Treisch, that's how I'd like to start my answer. I would have been surprised if you had not asked this question because we know each other quite well. I mean, we know each other really well. It's all guidance to conservative yes or no. Please, think back three months and think We've said right from the start and with hindsight we see the development as a confirmation to be rather conservative due to the high level of uncertainty and that is why we've been revising our guidance in Shorter distances, so we do this on a monthly basis, not quarter by quarter. That is due to the fact that the order backlog is at a historic high. However, there are certain reference values that are still lacking regarding how order backlog translates into actuals because we're still Thank you very much. Thank you very much. The pressure remains unchanged and high because storage is part of any project we have once it exceeds a certain size. And in terms of guidance, this means that we looked at this very carefully. I mean, we've been blamed for being too conservative at the beginning of the year, but With a view of the development, we can explain why this was the case. And the framework conditions haven't changed in the back end of the year, apart from the fact that there are first vendors who commit to certain delivery times. That's not generally the case, but individual vendors do that and for tactical reasons I'm not giving you any names here so that is why we're fairly confident that as regards the top-line development we are quite confident that we achieve our targets and the first question the development of the non-public sector you're absolutely right Q1 was rather hard but you have to Make a distinction between SMEs and corporate business. In the second quarter, the industrial customers have developed better, but we still see, and I don't want to hide this, we have a difficult situation in our own industry, and we have a difficult demand situation in the classical SME industry. which still accounts for almost 50% of our business. Right now we're compensating this quite successfully by our corporate business with individual big customers and with the public sector business. If in the second half year due to the economic development which shows some slight improvement should We see a change here, then we will have to assess the development towards the end of the year. Yes, thank you very much indeed. That's what we do, Mr. Treisch.

Next question, Martin Jungfleisch, BND Prima. Yes, good morning. I do have a question on customers' reactions to the hardware price increase. The order intake and business performance, is this driven by pull-ins and will this have effects for the second half of the year or do you also expect a strong order intake in the second half of the year as well? And how do the customers change their procurement behavior with regard to critical and non-critical infrastructure? and what do you expect to happen whether the customers even adapt their budgets for 2027 with regard to the higher prices. The first point, customer response. Well, we see customers that put everything on hold and there are other customers that go through this process step by step and are rather careful. What you say is practically what I intended to say. There is an uncertainty. Yes, we do have quite a high order backlog, historic high. But how this translates into top line growth might not be at an equal level. And this is exactly what you're referring to. So what does that mean? It might be that individual customers might place several orders with different providers. This is what we've seen during COVID. Customers can place orders that are non-binding and can cancel them depending on their own economic development and the industrial development. So the order backlog might be high, but the delivery times might also be pushed into the future. So this could translate into effects onto the materialization into top line growth. So this might be quite significant. And this is why we cannot say where everything that we have got with a certain deadline can be materialized in this fiscal year. However, We do not expect a decline in order intake. Since the end of the second quarter, we see a positive development for July. We can confirm this already. Third quarter will most likely see positive values. We started positively just as we ended the first half of the year, so we do not see any weak signals into this direction or that direction, which might lead to a totally different investment behavior in the second half of the year. How do the customers respond to higher prices? Well, most of our customers, regardless of Thank you very much. Thank you. You know the buzzwords, and we've mentioned them time and again in our quarter reports. We need increased storage capacity and computing capacity due to AI, edge computing. The CPU and storage volume needs to be increased, but on the user side. So these are structural trends that have not changed, and this is why most of the customers... Use the existing budget and reallocate their spending according to the prices. So some vendors might be taken into consideration that were off their chart in the past because now the vendor can actually And the next question. Good morning. Thank you very much. I would like to ask several questions. Number one, incremental EBIT in the other Europe segment. We see 10 million year over year. Could you shed some more light onto this? How much comes from acquisitions? because this seems to be a highly profitable business that you acquired and what you expect for the second half of the year. This is question number one. Question number two, the cash flow figures. Can you give us some more details? Strong June, what is its impact? on the cash flow or the belated project implementation so we can sort of get an impression for the development of the third quarter. Thank you very much. My colleague might add some more details on the cash flow because when we look at it superficially, this is actually the only flaw in our figures of the second quarter. We also announced it in the press release, also in the quarters report, cash flow actually doesn't worry us in the long run. And I'm not saying this against the backdrop that the promissory note bonds, which actually puts us in a quite comfortable position, Christian Jehle already said that we see an improvement in the DSO. So what's the underlying message? We're actively managing or, you know, quite aggressively managing our cash flow and the capital. What is this cash flow and capital increase been about? Well, we have the project bound inventory. and they increased but this doesn't mean any risk with regard to depreciations because we have specific projects backing this up. And to do this in these times is only possible for companies that are very well financially set up because we do have a buffer. And we have longer delivery times for individual components and projects, but we can buffer this. This can lead to the fact that at the deadlines, and yes, it's been the case for a couple of projects, that network components and notebooks that were in our inventory for specific customer projects, but the project hadn't started, maybe the docking station couldn't be procured. And in such a case, in such a scenario, we can put this into our balance sheet, but it doesn't entail a depreciation risk, but it gives us the possibility to show to our customers where the added value is when cooperating with Bechtle, because some of our competitors do not have this room for maneuver. We have this room for maneuver because we have a sound balance sheet. This is what I wanted to say upfront when it comes to the underlying mechanisms for cash flow. And Christian Bestler said that we can be quite optimistic that we will see an improvement in the situation by the end of the year because we have special effects, deadline related special effects that sort of had this negative impact on cash flow. Yes, I would like to comment on the other Europe segment question. Let us take top line as a proxy because you said where does the contribution to the result or the earnings come from? Well, we have a 50-50 situation, organic growth of 50%, but we see an overall positive trend. So the acquisitions in this segment drive a growth and the EBIT contribution It's also to the amount of 50%, and you asked about the second half of the year. We are seeing a positive development. The acquisitions that we've made pay off, especially on the Iberian Peninsula. They develop positively. We see a trend in line with our acquisition plan. So we expect positive contributions in the second half of the year to our balance sheet when you look at the margins. The segments show a little less than what we see on the German markets. This is due to two factors. One is maturity, and the organization, as you know, has been active on the German market for 40 years, so we have a different interaction of the different market elements. And the acquisition, of course, It needs a sort of ramp up time until we reach the margin level that we are used to. So the positive effects of the first half of the year will be continued in the second half of the year and we expect a further increase in 2027.

Well, one additional question if you allow. As a public sector business, could you briefly tell us How much is done at the federal level and how much happens at the state level, the federal state? And put this into relation to the investment program that is about to happen. Do you see any activities or increased activities regarding tenders for 27 that might indicate that there will be a stimulus program. Yes, we see this. This is reflected in the specific tenders, but also in the fact that we've started the year with an approved budget, because the past two years that was not the case. So I see that as true. We have a strong factor that we have a sound basis between state, federal and also municipal authorities. That's the fourth biggest industry, so to speak, healthcare that is. The stronger part is the federal business, but that doesn't mean that the customers are necessarily customers at the federal level. The Ministry of the Interior often has a consolidated tender covering lots of different regions, so the federal authorities orchestrate, so to speak, the tender for several entitled authorities who can then access this tender. So, if you look at the percentage figures, you can't deduce that 20% Thank you very much. And we are broadly based in this customer group, so there are no single dependencies here. And I've pointed this out several times, across the past years we've seen a constant increase in the tender, sometimes reaching billions, a tremendous opportunity if you win it, but also certain risk. Thank you for watching.

The conditions of the past.

Now we see a 30, 40 and 50% price increases combined with the delivery problems we have. And that is something that makes us careful regarding the interpretation of the impressive order backlog we have. And we'd like to leave it at that. We still assume that It will have positive effects in the back end of the year, both top line and bottom line. I've said in the past discussions here, we have S4HANA, and we're making great progress here. We had a pilot, the system house in Neckarzulm, that was the pilot. We had a Zexful going live, and now we are escalating across different companies and countries. So we are on plan in terms of project progress and also on budget. So, yes, exactly, that's the answer. Well, OPEX, of course, are impacted, but CAPEX, too, in terms of depreciations. 90 to 100 companies give or take a few which we have to shift to SAP for HANA and a high number of them have been acquired so this migration will be part of the post-merger integration and you don't do this over the weekend so I assume that the figure Christian has just mentioned will In the books, not only next year, but in the years to come.

We'll have a rollout plan that will cover several years.

Thank you. And one final question. Due to the extreme high prices for new devices, I hear that refurbishing of old devices is getting... More interesting. Do you see the same with you customers? And will that mean that you can have higher margins than just selling new hardwares? We see it with our customers too, yes. And there are existing public, certain public tenders where it's part of the tender requirements to offer a certain refurbished part. The problem with refurbished parts is, or with the demand for refurbished products or refurbished infrastructures, that they often not the demand. We could do much more if we get more old devices or used devices. We have a certain certification that is relevant here for data elimination. We have consolidated this in Hamburg. and our Dutch colleagues have a great focus there. But the limiting factor is the offer of used products. I mean, I mean, customers also think about a longer use of their devices so that they are not forced to accept price increases Combined with uncertain delivery times. And that leads to further reduction of the limited offer. I don't want to hijack this call, but if you talk about offer as a problem, the customers who don't want this is the demand side. Now, offer means that We need to have returned products. You can only do business if you have old products you can refurbish. And of course we want to take those leased products. But if the customer says they want to keep the leased products, they extend the period, that's what I'm talking about. Okay, the alternative to refurbishing is to extend the leased products There's a period. Okay. Yes, thank you. So I almost hijacked this call. Oh, you can keep being with us. It doesn't cost more. Well, that's what you say. And then all of a sudden I'm faced with a bull. Right now there are no further questions in the German room and no questions in the English room. If you want to ask a question, either in German or in English, please press star and 1. We wait a couple of seconds. There are no further questions, English or German. And with that, I'd like to hand back to Dr. Thomas Olemotz for the final remarks. Yes. Thank you, thank you for the interesting discussions we've had. I enjoyed it and my colleague is nodding his head, so it was fun. I think we've addressed all relevant aspects that will make it easier for you to assess the current situation. On behalf of Christian Jehle and our IR teams, I wish you Thank you very much for participating and bye-bye.