adesso SE (ADN1) Earnings Call Transcript & Summary

Good afternoon, everybody. This is Martin Mollmann for adesso IR speaking. 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 there's pretty much confirming the preliminary figures from our talk release of mid-February. This has showed another year of extraordinary growth with even higher pace in 2021. Sales was up 33% and exceeded the guidance. EBITDA met the corridor expected. I'd now like to welcome as well our CFO, Jorg Schroeder, 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 this presentation. Feel free to open up the channels for the Q&A session afterwards. [Operator Instructions] Jorg, please go ahead.

Yes. Thank you, Martin, for the introduction and welcome, everybody, to be here present today for our webcast for the full year 2022. I will run you through the slides. And as Martin pointed out, we will later have room and time for your questions. So let me start with the top line development. As Martin already pointed out, we see a 33% increase in sales to a total volume of EUR 900 million in 2022, coming from EUR 678 million in '21. The setup of the sales is that 29 percentage points of the 33% growth came by organic growth. So recruiting new people, getting new projects, getting new clients, the general business of what we do is 29% increase. That is what we are pretty proud of. And another 4 percentage points came by acquisitions, so companies that we took over in M&A setups. The head count, as you see, is on average figures, 29% higher than the average of '21, although and that is why we also show the year-end figures from '21 compared to '22, the year-end figures actually grew by 39%. So overall, we have roughly 40% more FTE and year-end '22 compared to the previous year. How does the sales split look by the industries that we are working in? There are a couple of good news here. First, in all the industries that we work for, we see double-digit growth rates as is seen in the column that shows delta year-over-year. The slowest growth, actually, we see in insurance with just plus 12%. But we also have very high figures like plus 63% in the public sector and plus 78% in manufacturing. So these are very good numbers, probably not maintainable through a lot of quarters, but we are very happy that all industries that we work for developed quite nicely. And also, the new ones, retail and utilities that we just started as own organizational entities in the beginning of '22, also show up here with very good growth rates of 58% plus respectively, 48% plus for utilities, both around EUR 50 million in revenues already. So this is really good setup, good development. Also, the diversification is pretty good as seen on the diagram on the left-hand side. Our biggest industry with domain knowledge is the public sector with 17% of the overall volume, 19% is the cross industry sectors, so everything else. 15% is insurance business, 30% banks and so on. So we are still very much diversified. Top 10 customers make around 23% of the overall sales volume. So this is all pretty good news compared to risk aversion and diversification. If we look at the sales split by region, there's not so much news here. We are still pretty much a German company with 81% of the business done in Germany, another 12% in Switzerland, 3% in Austria, so roughly 95%, even a little bit more is done in the German-speaking area, the DACH area. Although we also grow outside of the German-speaking area, for example, Turkey, which is our biggest country that is outside of the German-speaking area. We have over 500 people there and the domestic volume increased by 36%. Also, our shoring activities, which are excluded now in this -- on this slide, so -- but the shoring coming from Turkey, Bulgaria and Romania increased by roughly 50% actually. So the numbers are much, much smaller since we also grow 33% in Germany. And if you do so it's hard to catch up for the other countries because EUR 729 million, roughly EUR 730 million is done in Germany. Okay. So this was the numbers for sales. Now we come to the earnings. First, EBITDA. And there, we see a decline from EUR 102 million EBITDA to EUR 92.9 million, so 9% decrease. But we think we should exclude the one-off effect here that we had in '21. We sold a group entity, the e-Spirit Group in '21 to American Company for an EBITDA effect of roughly EUR 18 million, EUR 17.9 million. So the operating EBITDA in '21 would have been EUR 84.1 million. And compared to that, we are a little bit better this year -- last year with plus 10% to the EUR 92.9 million. But of course, the plus 10% is worse than the plus 33% in sales growth that we have seen before that. So that implies that we have actually lost a little bit of profitability. There are a couple of reasons for that. I will come -- walk you through that through the other slides, but just to touch on the big points here. We faced a little bit of underutilization last year. So due to the high growth of plus roughly 40% FTE, we were not able to get everybody into a project very fast and that meant that we lost utilization. We also had an unusual high sick leave, so illness was an issue in 2022. And I will come back to that. And we had increased other operating expenses mainly for on-site events and also for our own IT infrastructure, where we implement a new ERP system. Okay. So first, a look at the quarters. Here we see how we fared in every quarter. So the first quarter in 2022, we actually see a decline of 22%, but it was probably one of the better quarters, maybe the best because in the first quarter of '21, actually we had the divestment of the e-Spirit group. So EUR 17.9 million is included in there that is not coming from any operating activity, but just a sale of a group entity that we usually don't do. Then the second quarter was kind of bad, only EUR 10.3 million in EBITDA. The second quarters are usually -- usually the worst compared in a year because they just have the least working days. So the amount of working days is the lowest number through all the quarters in a year. Usually, the most working days are in Q3 and that we have also seen last year in 2022. There's another thing that in Q3, in particular, we had a lot of license sales volume for in|sure. Actually, and I can state that here already, we had a record year for the in|sure license sales of around EUR 17 million in total, which is the highest record we have ever done with in|sure and yes, pretty happy with that, and that kind of safe last year on earnings and is probably not repeatable at least not this year again. And the fourth quarter then, yes, the fourth quarter was the worst in terms of illness. But yes, so overall, it was actually quite okay with EUR 21.5 million compared to that we really had a much higher sickness leave than compared to previous years. Okay. So the EBITDA margin went down to 10.3%, which is also below our own guidance, which stated that we wanted to have above 11%. So we missed that goal. 15% was the EBITDA margin last year. But there again, is the e-Spirit deal included. If we would exclude the e-Spirit deal, the margin would have been 12.4%, which is still very good and still the record margin that we had in the past about 10.3% now, we came back to more mediocre level that we are not super happy with. If we look at key figures, yes, we see the average FTE growth of 29%, which is good. Sales growth, 33% is good. Also, gross profit, personnel costs are pretty much in line with the overall sales volume. The other operating expenses are much higher. The reasons for that is a lot of more on-site events. After the pandemic measures went down in Q2 last year, we did a lot of on-site events. So gatherings, community gatherings, meeting people again and also have some kind of party events and so on and also physical gatherings in our own office locations. And not all of these events were billable to customers. So we lost a bit on that. And of course, the expenses itself for the events cost us something. And we invest in our own IT infrastructure. In fact, we will have a go-live tomorrow of the financial part of our new S/4 HANA system from SAP which we started implementing last year and now we are pretty much finished. We will probably have a hypercare phase for the next couple of months. But the main thing is done and we had additional investments in terms of expenses here that we see on this side. So if we look at the profit drivers then down here in the slide, we see that utilization was actually not a very good year, at least not in Germany. The other regions fared better. Germany is the biggest market and utilization rates were not very good. In Q1, they were good, but Q2, they were in particular, very bad and also Q3, Q4 were kind of mediocre. We had effect against that, so daily rates actually increased slightly, but they increased. So we started renegotiating phase for daily rates with all our major customers in the beginning of '22. And yes, the results are quite good for us. So we already see daily rates improvement in '22 and we think this will continue in '23 because a couple of new contracts just start on a new quarterly basis or on an yearly basis. And so we are pretty certain that we still have room for improvement for daily rates and actually are happy that it takes place in the -- yes, in the first place and that we are able to increase the daily rates. License fees, I already mentioned that. For in|sure, it was the record year. Yes, this is very good, EUR 17 million. So a lot of new deals got signed and now we have a lot of implementation projects to do, so in|sure it had a really terrific year. And the personnel cost per FTE [ rised ] by only plus 2%. So of course, personnel cost per FTE rising is usually bad news, but only 2% is actually less than we expected. We expect that this will continue though because the general wage inflation is happening, the industry standards of salaries increase and we have to adapt to that. But the countermeasures that we take against that, first and foremost, increasing daily rates. And second, more utilization of shoring activity actually works. So we are pretty good in taking countermeasures against the personnel cost per FTE raises. Okay. Now if we go down further in the P&L statement coming from EBITDA, we see that depreciation is pretty much in line with the overall growth, 33%. As mentioned, 29% is the depreciation increase. But since EBITDA is lower than last year, the overall consolidated earnings, the net earnings are 39% lower than last year. This is the figure against the number, including the e-Spirit deal. If we look at earnings per share, we see that they are 42% less. On the left-hand side, we have also shown that figures, if we would have excluded the e-Spirit deal, the earnings per share last year would have been EUR 4.78. Coming from that number, we are still 8% lower with EUR 4.40 in earnings per share. So overall, the basic story is we have very good top line growth, but we lost profitability in '22. And the reasons I already mentioned. And I think I will also come back to that and what we do against that or what would we expect in '23 happening for these reasons. First, the dividends. We will propose an increase in dividends that would be the 10th year in a row to EUR 0.65 per share. Although we lost profitability, we think there is enough room to continue the equity story in that regard, having a low dividend, but growing dividend and doing that for a 10th time in the row, we think is advisable. That is why the Executive Board and the Supervisory Board have already decided in that region and will present there to the Annual Shareholder Meeting in the beginning of June this year. Looking at the balance sheet and some financial KPIs, we see that cash figures changed a little bit. You have to keep in mind that in the end in October '21, we had a capital raise. So cash figures were very good in that regard. But we bought a couple of companies and now our cash items are pretty much in normal range. Again, we are in a net debt position of EUR 15 million. We have increased the financial debt a little bit. Actually, we have a syndicated loan agreement now with our house banks. We closed that deal in November last year to have more firepower for M&A activity. Yes, working capital increased overproportionate, 36%. So to my regard a little bit too high, it's higher receivables mainly. And day sales outstanding also worsened with 92 days. Last year, we were at 87 days. This includes the contract assets, so receivables and contract assets are included here. Yes, I hope or at least that's one of the reasons why we implement our new ERP system is to have a more automated process to bill our work and to have a charge faster to the customer and collect money earlier. So hopefully, we will probably not see huge effects in '23, but hopefully, in the coming years, we will have at least not overproportionate growth of working capital compared to the sales growth. The goodwill increased, yes, because of the M&A transactions that we did, the equity increased a little bit, which is mainly retained earnings. We have also put here the book value per share CAGR for the last 5 years and the average return on equity for the last 5 years. This is -- I think these are fair numbers. So coming to '23, we look at the guidance. Yes, we still see a continued market demand and actually on general terms, a good outlook for '23. For the core business, in particular, the IT service business, we see in all the industries that we work for, still a lot of things to do in terms of digitalization and most companies also think the same way and have their budgets ready for new initiatives, new projects and continuing projects. So the order entries are really good. So the general outlook, we think is good for us. 2023, again has 2 less working days. Yes, so this is not so good. So 2 less days that we could charge compared to '22, '21 actually at 254 working days on average and this year only has 250. And yes, ongoing investments in IT infrastructure. But as I mentioned, the go-live is tomorrow or over the weekend and then we will have a hypercare phase, but in the second half of the year, the expenses for the IT infrastructure will go down dramatically and will overall not have the same effect as last year. Utilization, we expect to improve the levels from the last 3 quarters of last year were not very good and we think we can improve on that. And also, illness -- sickness leave should normalize, we think after the pandemic was over, we saw actually a 1.5% higher general sickness leave rate, which is -- sounds not like much, but for us, it's quite significant. And it is in line with what the health insurance companies put out. So we are just a small population of just like 8,000 people. But even if you look at the health insurance companies, they state the same thing, not only for adesso, but for at least whole Germany, that is what I know about. So we are in the same ballpark. And yes, our countermeasures against inflation and wage inflation, in particular, daily rates and shoring, as I mentioned, are on a good track. So we are quite confident that we can keep inflation in its place. And that leads us that we say in '23, we want to have a sales volume of over EUR 1 billion and an EBITDA between a range of EUR 100 million to EUR 110 million. Okay. One view on our M&A activity. This is for the last 12 months. And as you see, these are roughly, I don't know, 10 to 12 deals, roughly 1 deal a month. The last 2 already happened this year. In January, we closed the deal with WebScience, which we renamed to adesso Italia. It's a, yes, IT service company, pretty much like a small adesso in Milano. And now we have critical mass there in Italy. Prior to that, we only had an office location in Italy. And now we have 100 people and can continue the growth story also in Italy. And in February, we signed a deal with WEPEX, which is a banking specialist consulting company. The closing will be in April. And yes, this is the second deal that we already have done in 2023. And the M&A pipeline is still strong. So -- and as you also see, we are still looking at smaller deals where we are under the radar of the big private equity competition so that we can get valuations level that are fair and quite conservative. One thing that is news, I think, released just 1 or 1.5 week ago. We again won price as a attractive employer for '23, great place to work. We again won the first prize for IT companies that took place. And also, again, the second time we won the first price for all companies that took place. This is a competition that is conducted like a market research survey. So yes, 931 companies, I think took place. And we are very happy and proud that we could again come out on top and have the first place here. This shows that we are still perceived as an attractive employer, which is important to scale up the business. And as you see here, also on the left-hand side, last year alone in Germany, we had over 50,000 applications coming in. We could hire like around 2,000 people. So we were still able to choose the top 4% that have the best fit for the jobs we are looking for. And also, our churn rate is around 8% on a 12-month average. So that is well below industry average of more 15% to 20%. So people still like to come to us and they still like to keep with us. This is -- yes, I like this slide pretty much and it shows that the growth motor is still in its place. So this is just a summary of our playbook for '23. So what do we expect? We think that we will have double-digit growth in sales and also in earnings. We will probably see a head count growth to 10,000 [ adessi ]. This is how we call the adesso employees. Yes, we will probably continue to increase prices to cope with the effects of inflation. We will probably see further internationalization, so expanding in existing markets, finding new markets. They can already make an announcement that the next office will be in London in U.K. as a new market and we will increase our shoring capacity in the existing near-shoring markets in Turkey, Bulgaria and Romania. But from April, we will also start our activities in India to have offshore capacity. We will start small there to try it out like we usually do. But we see customers who are open for that discussion to, yes, buy even cheaper staff and utilize them into projects, usually in mixed teams, so not full-fledged offshore teams, but mixed teams where you have additional capacity to lower prices. Then we will continue with our M&A activities. As mentioned, we still have a strong pipeline. We're looking at a lot of projects. And we will have, hopefully, further progress with our industry software solutions. As mentioned, in|sure had a terrific year in '22, which is probably not to be topped in '23 although the pipeline for in|sure still is good and I'm pretty certain that we will see a couple of good license deals also this year. And we have other smaller, much smaller software solutions ready now. Our new DRG system is already sold in the health care market. We have material.one in the automotive sector, which is running quite good. Our manufacturing industry solutions. So we are continuing to do on the solution part for the other industries and not just insurance. Yes, this is my summary for 2022 and the outlook for '23. And now we have time for your questions.

Yes. Thank you, Jorg. Do we have questions? Mr. [ Spang ] I see will have a start.

My first question is to the margin in 2022. If we also -- let's name this [indiscernible] will gains in the other operating income, you already nearly had a margin decline of around 300 basis points. And you also mentioned this during the year that you had these several margin dilution effects. But can you quantify them a little bit more specific? So which parts of them diluted the margin by how much? Can you give us there more details?

You mean from...

So from higher sickness rate...

Sickness rate utilization. Yes. Okay. I see. Yes. I cannot give you exact percentage figures, but rough estimations that the biggest impact, actually, what we calculated, that is for Germany alone, but that's the biggest effect, of course. For Germany alone, the biggest impact actually was the sickness leave quite surprising because it's not super high, not everybody was ill, but even small percentage numbers for people who cannot do any work is just additional time that is not chargeable and you don't see it in sales, but you see it at the same amount, not in the earnings. And that is -- so sickness leave has the biggest impact. And then second is probably utilization. So not having a good utilization rate is, of course, for every professional service company, not very good. And despite -- I mean, we were good in Q1. So there, we really have to look at the quarters. But after Q1, we really lacked to have the same utilization rate again and that is the second biggest impact. And the third then is the increased other operating expenses, so more events and investments in the IT systems.

Okay. And then concerning utilization, I know it's not a official KPI from you and you normally don't like to talk much detail about utilization. But can you give us a little bit more details about utilization in 2022 versus 2021? And also, if you talk about better utilization in this year, how much can you improve this year or what is your target to improve?

Yes. Yes, actually, I think we -- I don't know how much we really disclosed. What we described pretty much in detail how we work with different utilization KPIs in the annual report. So we have 3 main KPIs that we look at. And I will give you a view on '22 and how we usually look at that. So the first is -- the first KPI is free people. So people who are not working in projects from the operating workforce, yes, not administrative workforce or sales workforce, but just operating people. And this number is on a green light if it's below 11%. It's yellow if it's between 11% and I think 16% and above that, it's red. And in 2022, we were definitely in the yellow part, so not very green. It depends which industry you look at and which time you look at when is a project transition and so on. But on general terms, we were pretty much in deep yellow and this could be improved. A second measure that we look at is what we actually call utilization. And this is from all the possible billable hours. We normalize that through sickness and holidays. So this is not included in the possible billable hours. And then we look how many hours will really charge against that. So how many billable hours have we in compared to the possible billable hours that we could have minus holiday and sickness. And that number turns green if it's above 85%. It's yellow between 80% and 85% and below 80%, it's red. And again, 2022, Q1 is different. Q1 was pretty good actually, but Q2 was very bad and even Q3 and Q4 were mediocre, so more in the deep yellow, so in the low 80%s and sometimes even turning red for some industries. This is something we really need to work on. And then we have a third KPI that we call booking intensity and that is looking at a population of the operating workforce who are working in projects. So only the people who are actively engaged in a project and then we look at how much of their time is devoted to the project and what goes away for administrative staff trainings and so on. So this number can easily be beyond 100% if people work overtime. But it generally turns green in the high 90%s, so 95%, 97% is green. In the low -- so between 90% and 95% is yellow and below 90% is again, red because people leave too much of their time away from the project. And book intensity was also not very good. So in the low 90%s pretty much, and this can easily be higher. So on all 3 frontiers in terms of utilization, how we look at it, so getting more people into projects than increase utilization of the people and keep the booking intensity high could be improved. And that is why we think we have a lever there compared to '22. Even if we just do one thing better than last year, we will have an improvement.

Okay. So is it the goal to improve in all 3 KPIs or do you see some problems in one of the 3 to improve?

No. Yes. No. I think all 3 should be better.

And then on...

More questions from Mr. Wolf and Adam Jakubowski and Mr. Sauer as well. So [indiscernible] maybe one more.

Yes. On in|sure pipe. So you mentioned that you will be not reach the 2022 level in in|sure licenses this year probably. But what is your pipe? Is it lower than in the past because you closed deals or yes, what is the pipe and how is it developing?

Yes. So the pipe is still good. So -- and I still expect it probably have to be because I get asked these numbers again. But I expect not a very bad year for in|sure, just not the same record year as last year. But I wouldn't be surprised if it's still or again a double-digit million figure for license sales alone.

Then Mr. Wolf please and thank you Mr. Sven.

Congratulations on the successful year. I have the following questions. So the first one is on the ERP implementation. I guess, SAP has tools to better monitor the working capital. Is this correct? I guess the answer is yes. Otherwise, you wouldn't be implementing it. And the second is on India as an onshore -- as offshore location, sorry, why do you think this is the right region for you? I would associate this region with high turnover. Do we have the right people to manage shoring from there, I would assume, yes, but maybe you could shed some light on your plans for that region. And then the third question is on the new "hot stuff." I've seen that your founder has already commented on ChatGPT. I've read that it can dramatically or significantly increase the coding times. So usually, coder can write 100 lines a day with ChatGPT. This is much faster. Maybe you could talk about the implication of automation, in general, it's probably not just ChatGPT on your business, whether it's reducing potential. I guess demand is very high in general and that it's basically a tool which is welcome for you.

Yes, thank you, Mr. Wolf. Very good question. So starting with the ERP question, yes, you're right. SAP, of course, wouldn't be SAP, if it's not very good in all regards to process optimization of administrative staff. So we already have SAP in place for our HR department. We actually had to go live there last year in November, I think. And now from April onwards, we will be with the finance department using that. So working capital is just one thing, but I also think that there should be a lot of automatization processes going on for the billing processes in the future and yes, more opportunities in terms of reporting intelligence and so on. So I think it's a good investment. And actually, when we thought and discussed that internally because we are still pretty much -- we see ourselves as a medium-type entity. But since we are growing double-digits every year and you just extrapolate that a couple of years into the future, we could become a large company. And for that, we really have to discuss what kind of system helps us to, yes, deal with the processes such a large company will have. And that is why we decided to go with SAP, even if it's maybe early stage for us at this point in time. So yes, the general answer is yes also in terms of working capital. Your second question about India is something that we also discussed quite intensively because you can have a couple of different views on that. For example, there are people who say, okay, if your delivery countries are in Europe, it's probably good to have the same time zone. So why not go to Africa, for example, there you have much cheaper staff at the same time zone. Of course, you can go further to the east and the further you go, the cheaper it gets. That is also sure for our nearshore activities. But India, yes, you said the high churn rate, that is true. So why India? First, India is a country which a lot of even very large companies use as IT service capacity. So there's a good infrastructure in terms of computer science [ teached ] in universities, a lot of people already working in that field. People know how to do offshore business with companies in Europe or even in the United States. So the infrastructure for that kind of service is very well-developed and probably better developed than anywhere else in the world. That's one reason. Another reason is that we actually had in one of our projects with a large automotive manufacturer, we already have a Indian partner company included in that project because the OEMs are very, very price-sensitive. And you only usually even for the bigger projects have a shot, when you are price-competitive. And for that, usually some type of shoring is included. And the OEMs are also since their own delivery system works globally, they're very open to source from anywhere in the world. And so they are used to actually have offshoring capacity from India from their suppliers. And that is why we tried that out already with a partner company. And it worked quite well. What we see, and this is just early in the learning experience that we have, that you need good, yes, we call that how will we translate that [ bridge hats ], yes. So people in Germany who are from Indian accent and can speak Indian, can speak English and are the people who manage the project locally in Germany, but also are the managers and communication heads to the Indian teams. So that is what we already have. We have an own department for that with someone who has done that before at Cognizant pretty much the same thing, now has 3 employees for these type of bridge hats. And now we will start with a small team actually in India. And actually, the people that we looked out for in India is not just anyone who studied computer science, but it's actually a team and the whole team worked in the past for Allianz, for the German Allianz Group, and that is something what we find important. So they are used to work for a German company. They are used to work for a German insurance company, which is, in particular, quite a significant approach because they have high quality standards at Allianz. They want to have teams who know their stuff, who know what the business processes are. And we actually get a whole team who has done that in the past. So we think that is good for a start and learning experience to do that in India. But it's totally fair to say, why not Vietnam, why not Africa, we have discussed that and it's just an opportunistic first approach now that we go to India and we will see how that turns out. And your last question was about ChatGPT. That is, of course, a hot topic. And maybe not only ChatGPT, but also what is known as LLM, so the large language models, you are perfectly right, our Founder and Head of Supervisory Board is a professor of Software Engineering and actually teaches and yes, there's a lot of university staff in the field of artificial intelligence. So we think I would say the total answer to all the questions around that topic cannot be given at this point in time. It's definitely a very new hot topic and it will be discussed a lot in the coming months and years also for us. We see a lot of opportunity, first for ourselves and yes, using these large language models and artificial intelligence for our own administrative processes, but also to use that in our portfolio. And of course, there are risks included, like you said, there are ChatGPT can write software code pretty fast. And actually, I've tried that myself and it's really good. But for example, you could not say to ChatGPT write me in Java code a modern core insurance system. Yes, so if you state that, it will not come up with in|sure. Yes, that just won't happen. So at this point in time, it's not that you can easily say that you don't need the services of adesso anymore. And actually, at this point in time, we see more chances than risks. But of course, both is possible and the coming months and years will show how it turns out. But we are actually fairly optimistic about the future.

Great. It also doesn't work for picking stocks yet, but let's see...

Very good.

So next is Adam Jakubowski.

Okay. I also have 3 questions. The first one, in your playbook for the current year, you haven't mentioned the banking solution. So I would like to know about current status of this project. Are you still hoping to get the pilot customer or have you stopped -- or have you stopped the project? That's the first question. The second is, you have mentioned just moderate increase in the personnel costs by FTE. How is your projection of this KPI for the current year? Do you think you can stay at this level of 2% or do you think -- or are you planning with a higher number? And the last question is -- concerns the companies or your subsidiaries in other countries outside of the DACH region and Turkey. How is actually the profit contribution overall of these countries? Is there still a profit burden or are these countries already contributing positive to your earnings?

Yes. Okay. So starting with adesso Banking Solutions, it's actually implicitly included in the slide -- in the last point, further progress with industry software solutions. This is not only in|sure. It's also all the other industry solutions, which includes the banking solutions. But -- and this is probably why I haven't stated that particularly is because we don't have customer situations where we are close to signing. So it's still not that we see that it's very close to sign a deal with the bank about that product. We haven't closed it because actually it doesn't cost us anything or at least not really much, just a little bit of sales activity. We don't have to invest into something. We don't have any fixed costs concerning that. So it's just an opportunity and we do sales activity still, but not successfully, unfortunately. So we haven't stopped the approach yet, but it's not on the cards that we will have huge success with the product this year also. So for your second question about the personnel cost per FTE, I would jump back to the slide so everybody is on board. The last item here, personnel cost per FTE increased by plus 2%. You're right. And we expect for 2023 to grow -- that figure to grow further. So I don't think that 2% is maintainable. I also don't think that it will increase to current inflation levels, but somewhere in between. So somewhere of mid-digit single percentage figures will probably be the rise of the personnel cost per FTE. But again, I also think that the countermeasures in terms of daily rates insuring are at least sufficient to mitigate the negative effects of that. Yes. And your third question was about internationalization and the profits from the other countries. Yes. So all the other countries, even -- so if you also include Turkey, the other countries are really, really small. Italy now has 100 employees. But prior to that, Italy has had, I think, one. So it was really small. Hungary is, I think, lower, 10 people. Actually, yes, we have bought a couple of -- 2 companies there. So now it's bigger. And Hungary is profitable. The Netherlands was profitable, but had a bad 2022. Then we acquired a company in Sweden last year that is not -- also had a bad 2022. All these figures are super low. Yes, so sometimes we talk about a deficit of EUR 50,000 or something. So overall, in comparison to the adesso group, I mean if 95% is the DACH region, if you include Turkey, you're probably at around 98%. So the rest is really -- doesn't have a big impact. But most of these countries still struggle with growth and with profitability. Yes, that's probably the answer to your question, right?

Next in line is Mr. Sauer from Kepler Cheuvreux.

I was wondering, do you have any target for medium-term offshore or SmartShore, nearshore as a percentage of your group sales? And the second question would be regarding KIWI Consulting. I saw that it requires a higher share of external service providers. And I was wondering if it's possible to replace this with your own internal recruiting efforts in the future. And the third question would be regarding how -- if you could remind us how to understand the impact of license deals on the EBITDA figures. Just as an example, in Q4, there was a press release that you closed the deal or it was actually after Q4. But the press release that you closed the deal in Q4 with the Bavarian insurance chamber, but yet the EBITDA in Q4 for the IT solutions segment was pretty much 0. And I assume this is because of this consolidation and reconciliation effect. So I was wondering if you could help us understand how we should see this impact on your EBITDA figures for the segment.

Yes. Thank you, Mr. Sauer. Just let me see to start with -- yes, the target for showing sales. No, we don't have that. And we usually don't work with that kind of numbers because we try to have a very entrepreneurial setup in the group and leave the forces to work themselves. Sometimes, we have to jump in and give some guidance for direction, but we don't work with specific percentage figures that shoring has to be 20% or that kind of. We just try it out and see how it works and increase if the market says we like that, then we would improve on that, but we try to grow on all the regions that we are working in all the industries that we are working in. So we wouldn't stop any initiative in terms of growth just to tweak some percentage figures. And so that is why we don't work with specific targets in that regard. Your second question about the KIWI company is on-spot. So KIWI actually is a company that works with roughly 100% of freelancers and external subcontractors. That is just how KIWI is designed. And we bought KIWI basically because they have a very good footprint and projects with a German national bank, which has become our biggest -- our biggest customer since the acquisition of KIWI and still is also for '22. But the large majority is because of that huge freelancer network that KIWI applies. And -- but of course, what you also implied in the question is, can you replace some of the freelance with your own workforce? We have actually done that. We have replaced or additional resources from adesso utilized in the German national bank. And so we have our own employees besides that. But usually, in these big projects, you have a lot of specific knowledge that is needed and specific people that are needed in these kind of projects, which we don't have at adesso. So it's still that we are reliant on the freelancer network of KIWI. But we have re-staffed and additional resources from adesso also into the project. And your third question was about, yes, the licensing and EBITDA. Yes, you're right. I mean with the Bavarian insurance chamber, we had that deal and in|sure had this EUR 17 million in license fees. These are one-to-one. They are sales, but they are also one-to-one in earnings pretty much. They are discounted for some royalties and kickbacks that could take place in the future, of course. But other than that, it's one-to-one also earnings. The reason why the overall solutions portfolio didn't had a huge earnings effect is first that we also see a lot of investments in in|sure, but also in the other products that we have. So none of the other products has done any positive profit effect in 2022. So still very low. But we invest quite intensively into these products because we see the future potential of that. Not adesso Banking Solutions, as mentioned, but the other ones like the [ DOG ], like adesso manufacturing industry solutions and material.one we invest. And then there is one entity included, the adesso mobile solutions, which is also in the solutions part and actually earns a couple of millions in -- also in earnings, but this entity has actually a profit transfer agreement with the mother company. So the profits are transferred to adesso SE and hence not shown in the segment report of the solutions. This is a couple of millions missing due to that effect. So that's a consolidation effect, as you mentioned.

Do we have more questions from your side at this point in time? [Operator Instructions] So -- but it seems that there aren't any more questions. Am I right? Okay. Then thank you very much for your interest in our call today and your participation. I wish you all the best. For now goodbye. See you soon.

Goodbye.