Amadeus FiRe AG (AAD) Earnings Call Transcript & Summary

Good morning, everyone, at the earnings call of Amadeus FiRe AG regarding the Q2 6 months interim report we disclosed yesterday after the trading hours of the stock exchange. I'd like to welcome our CEO, Robert Von Wulfing, who will guide us through the presentation in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Robert.

Thanks, Jorg. Good morning, everybody. So half year figures of Amadeus FiRe what will be our message for today. We started the current year on a positive note in Q1 and experienced a second quarter that surprised with a worsening sentiment in German economy. Well, nevertheless, earning opportunities in the second half year should be better than in the first half year. 2026 remains a highly challenging year for the German economy following a decline in GDP in '24 and '25. The economy expanded by only 0.2% again in the second quarter of '26. The persistently high level of uncertainty intensified in the second quarter following the Iran war and the associated economic implications. A good indicator here in Germany is the ifo Business Climate Index. The ifo Index is composed of the current situation of corporations and the business expectation, while the assessment of the current situation remained stable at an exceptionally low level but stable throughout 2026, the expectation level worsened. The significant fall here from 90.4 points in February to 83.5 points in April reflects the pronounced deterioration and sentiment in the German economy. This results in weaker investment activities, delayed decision-making and slower business processes. Unemployment remains at 6.4%, representing more than 3 million unemployed people in Germany, while inflation increased to 2.8% in July. The highlights, the macroeconomic environment, as I said, remained challenging, characterized by increasing uncertainties throughout the second quarter. That was clearly reflected in customers' demand and consequently, in the development, especially in permanent placement revenues within the permanent -- the Personal Services segment. As a result, our second quarter targets in Personal Services overall were not achieved, although temporary staffing as well as interim project management performed in line with expectations. Looking ahead, our revised forecast does not assume any improvement in the weakening market conditions for Personal Services for the remainder of the year although the index in July improved a little. Against this backdrop, the management Board has adjusted its expectations to the lower end of the guidance range before published in the annual report '25. We now expect group revenues between EUR 350 million and EUR 365 million compared to EUR 362 million to EUR 394 million. This would be broadly in line with prior year's level. Our underlying assumption remains unchanged that the challenging situation among corporate customers will continue. Consequently, we expect revenue and earnings growth to be driven primarily by the Training segment, while Personal Services is anticipated to remain below prior year's level. Encouragingly, the Training segment achieved both its revenue and earnings targets in the second quarter, also in the second quarter of '26. For financial year '26, we now expect operating EBITA in the range between EUR 17 million and EUR 23 million compared with our previous guidance of EUR 20 million to EUR 31 million. Despite this adjustment, the forecast should still represent growth of approximately 24% to 68% compared with financial year '25, which was affected by restructuring measures. Revenue should stabilize over the remainder of the year and earnings performance should improve sequentially from quarter-to-quarter compared with the first half year of '26. This development is supported by a significantly higher number of working days in the second half of the year and a positive seasonality in training calendars, providing a more favorable operating environment for the group. The business development in Q1 '26. As I said, in the given conditions we had the additional effect from the Iran war. Labor demand remained weak, especially in cyclical sectors while public sector related growth could not offset these declines. Group revenue declined by 6.8% to EUR 82.3 million. Operating gross profit margin decreased to 48.7% from 51.2% while the operating EBITA margin fell to 0.6%. Previous Q2 '25 was 2.4%. According to the ifo Institute, Germany remains some distance away from a sustained recovery in employment. At the same time, structural drivers such as digitalization, AI, evolving skill requirements, and demographic developments continue to support long-term demand for training and staffing services. Overall, the first half of '26 was characterized by 2 contrasting developments within the group, while Personal Services segment continued to face a challenging market environment with cautious hiring activities, delayed decision-making and replacement dynamics, the Training segment delivered a resilient performance and generated both revenue growth and a significant improvement in profitability. Overall, group revenue declined by 8% to EUR 171.7 million, and operating gross profit decreased by 10.8% to EUR 85.9 million. Operating EBITA amounted to a low number of EUR 3.5 million compared with EUR 6.4 million in the previous year. The decline was primarily driven by the significantly lower business volume in Personal Services, particularly in permanent placement, while training made a positive contribution and continue to benefit from the operational measures implemented over the last year. In addition, higher financing costs and increased PPA amortization from the acquisitions completed in 2025 weighed on group earnings. As a result, the group reported a net loss of EUR 3.6 million in the first half year of '26 compared with a positive net result of EUR 0.7 million in prior year. Looking ahead, we expect improvement in earnings performance over the second half of the year. This should be, as I said before, supported by the seasonal factors and the significant higher number of working days influencing training as well as the flexible staffing services. And we should benefit of our costs and efficiency measures and the continued positive development of the Training segment. Some more details on Personal Services. Overall, the conversion of inquiries into actual hires remained subdued throughout the second quarter. This is the general issues we discussed already a couple of times in the past that we do not convert as normal. And currently, the rate of decline in our flexible staffing service, temporary staffing, and interim project management moderated somewhat. This trend indicates an initial stabilization of customer demand and from today's perspective is expected to continue over the coming quarters. In permanent placement, however, market conditions remained significantly more challenging with revenues declining more than 30% compared with the prior year quarter, demand and placement activity weakened noticeably compared with the previous quarter. Hiring decisions continue to be postponed. Recruitment processes became even longer and both clients and candidates remained cautious in the uncertain economic environment. As a result, permanent placement was the service most significantly affected by the poor B2B market conditions during the second quarter. Diving a little deeper in second quarter. The revenue in staffing amounted to EUR 42.7 million, 17.7% lower than in prior year's period. Operating gross profit declined over proportionally by 23.1% to EUR 24.1 million driven by the permanent placement decline. In response to the challenging market conditions, staffing levels within the sales and recruiting organization were continuously reviewed based on performance indicators. The number of fee earners was reduced by approximately 19% year-over-year. Despite ongoing cost and capacity management measures, the lower business volume had a significant impact on profitability. Operating EBITA turned negative, declining from EUR 3 million to minus EUR 0.5 million in '26. The placement results, combined with the lower number of billable days in the second quarter, which is the lowest level over the course of the year, were the main reasons for this unsatisfactory earnings performance. Thus, the Q2 performance and results were below our own expectations. Following the Q2 figures for the first half year, the segment revenues declined 17.6% to EUR 90.4 million compared with the EUR 109.7 million the prior year. As a consequence of the lower business volume, operating gross profit decreased by 20.9% to a little more than EUR 40 million. The decline in profitability was even more pronounced. A decline of EUR 10.6 million in gross profits translated in a decline of operating EBITA of EUR 4.5 million. Thus, operating EBITA fell by 78.6% to EUR 1.2 million compared with EUR 5.7 million in the first half year of previous year. At the same time, costs capacity utilization and productivity remain under close management, while investment in systems and processes were prioritized to further strengthen operational efficiency and prepare the organization for future growth opportunities. Regarding the Training segment. The segment delivered a robust overall performance in line with management expectations. All 3 customer groups or addressable markets achieved growth in the first half year of '26. Publicly funded training was marginally above prior year's level. In the B2G market, we first had to overcome the downward trend throughout 2025, which was achieved as expected. Private customer business in the B2C market developed accordingly to plan, growing with middle single-digit numbers and corporate training in the B2B market more than doubled from a small base, supported by the new companies, Masterplan and eduBITES. Here, B2B market conditions are as tough as we experienced in the Staffing segment and business is slightly behind planned levels. At the same time, we continued to execute our AI-first strategy by expanding AI-related learning offerings and corporate AI learning solutions for companies. The Training segment achieved a clear turnaround in earnings during the second quarter. Revenues increased by 8.6% to close to EUR 40 million as growth in the other businesses and contributions from acquisitions more than compensated for lower revenues at Comcave coming from a declining '25. Operating gross profit increased slightly, while operating EBITA improved from a negative EUR 0.9 million to a positive EUR 0.9 million. This development was driven by the adjusted cost structure, strong performance at GFN and Endriss. The newly acquired companies contributed a small loss in Q2. Overall, the segment performed as expected in both revenues and earnings. For the full half year, as mentioned, the segment delivered, although developments were right across the individual businesses and continued to reflect the respective markets demand and funding environments. GFN and Endriss continued to make good progress, while Masterplan and eduBITES further strengthened our digital learning offering and expanded our corporate training capabilities. At Comcave revenues remained below prior year's level as expected due to the declining trend in 2025. However, the organizational restructuring and site adjustments implemented in second half year '25 continued to improve the cost base and supported a strong earnings development. Overall, the Training segment generated revenues of EUR 81.5 million, almost 6% increase on prior year's level. Operating gross profit increased as well to EUR 45.5 million, while the operating gross profit margin remained at around 56% compared with close to 59% in H1 '25. Most importantly, operating EBITA improved significantly from a negative EUR 0.5 million to EUR 2.3 million earnings, resulting in an operating EBITA margin of 2.8%. This development reflects the improved operational performance across the segment and the benefits of the measures implemented over the past year. The Amadeus FiRe Group focuses intensively on AI skills that is qualifications and capabilities relating to AI as well as agent-based skills such as those used to support companies with onboarding and offboarding just as an example. Thanks to our unique combination of staffing and training, we can provide companies with comprehensive support, recruiting the necessary talent, training staff, identifying needs, and outlining suitable courses of action. The momentum in this market will continue to grow and open further opportunities. Our access to candidates, our extensive corporate contracts across Germany, a strong corporate AI learning program, and the growing network of AI-focused partner companies mean that we are very well positioned to capitalize on this. Regarding the outlook, the current financial year remains a year of transformation for the group. Ongoing conflicts, particular Ukraine and Middle East, together with energy prices and uncertainty across international markets, continue to weigh on business confidence and investment decisions. The economic outlook for Germany remains subdued, characterized by limited momentum and only selective signs of stabilization. The broad-based recovery is not yet visible by structural challenges such as weak productivity growth, delays in digital transformation and regulatory burdens continue to constrain economic development. Against this backdrop, the market for B2B services remains challenging. Decisions and activities triggering service costs are taken either with long lead times are canceled and/or postponed. This affects both staffing and training B2B markets. Our adjusted outlook as followed. We continue to assume that the strained situation across corporate customers will persist and that business sentiment will remain broadly at the subdued level experienced in the second quarter. Against this backdrop, revenues and earnings growth is expected to come primarily from the Training segment, while staffing is anticipated to remain below prior year's level. As a result, we, as the management board, have adjusted our expectations to the lower end of the guidance range communicated in the annual report. We now expect group revenues for '26 to end between EUR 350 million and EUR 365 million compared with the previous range of EUR 362 million to EUR 394 million. That should be broadly in line with prior year levels in the end. At the same time, operating EBITA is forecast is in the range of EUR 17 million to EUR 23 million versus the previous guidance of EUR 20 million to EUR 31 million. Even at this lower level, this would still represent a growth of approximately 24% to 68% compared with prior year level, which what I said already before, was affected by the restructuring measures at Comcave, what we did. Looking ahead, we expect revenues to stabilize and earnings to improve progressively over the second half year, as already mentioned, supported by a higher number of working days. Across the group, we remain fully focused on overcoming the current earning weakness as quickly as possible. If the business confidence in Germany improves, we believe attractive opportunities for growth and profitability will emerge once again. So this gave you an overview of our first half year. As I said, initially, not satisfying second quarter, improving earnings situation over the course of the year turning the negative bottom line to a positive one for the full year. Nevertheless, I have to state that Amadeus FiRe is in tough waters, especially in staffing and in permanent placement in Germany still, which we will see if there will be opportunities in second half year if the sentiment improves. So thank you. And now happy to answer your Q&A.

Thank you very much, Robert, for the detailed analysis of the first half year this year. Ladies and gentlemen, now it's your turn. We are opening the Q&A session. [Operator Instructions] So I got the first question in the chat from [ Borja Soldevila ] asked the question, with the new level of guidance, will you be able to reduce leverage at year-end?

Well, the -- as I said, the earnings in second half year are improving. Cash flow in first half year was positive. So we expect some more effect here in second half year, which will reduce leverage to a certain extent, but the given earnings level not dramatically. I think what I see is that Simon raised his hand.

Yes. May I take first, Klaus Breitenbach, who had a similar question in the same direction, what specific assumptions underpin your expectation for an improving earnings level in second half 2026? Are you already seeing improvements in July and early August trading?

Well, in the -- let's start with training. Here, we have some topics in our specific training calendars over the year, strengthening more the second half year than the first half year, which is also reflected in our planning. Looking at the earnings level at half year, this is on plan. And you see that the full year goal is not doubling the first half year results, but even more. And here, we are in line with what we planned beginning of the year. In training also having more working days is affecting revenues because it's -- you simply have more time to proceed trainings and revenues are generated by the hour of training. So this favors also by a seasonality effect from calendar our earnings here. Same accounts for staffing. In staffing, just as an example, in third quarter, you have, what is it, 7 more workable days -- working days than in Q2. Every day represents around EUR 0.5 million sales in temporary staffing, for example, and we pay monthly salaries to our employees. So cost of sales remained stable on the individual temp base and revenues increased overall by EUR 0.5 million a day around that. So alone from that, you will see, what is it, 7 days, EUR 3.5 million higher earnings than what we saw in second quarter in staffing. Same accounts for interim project management, more time available, more sales. Well, here also the cost base increases as the interim manager also is paid by the hour. So this as some remarks why in a stable weak environment, earnings will nevertheless improve.

Okay, Simon, now it's up to you. Please ask your question.

Can you hear me?

Yes.

Wonderful. I have a question first on temporary staffing. It shows that temporary staffing, you've shown a weaker sequential improvement versus some of your peers. Could you please elaborate on what is driving this? Is it primarily a function of your end market exposure or business mix? And also in your prepared remarks, you sounded noticeably more cautious about the near-term outlook than some of your peers. So I was wondering, yes, what gives you the confidence that the recovery is likely to remain more subdued from your end? That's my first question.

Well, first, on temp, what we see here is that we actually in numbers of assignments bottomed out already around the turn of the year. And since then, we are stable in number of assignments we are working on. So quarter-by-quarter, currently, our decline, which we saw on a higher level last year is bottoming out, but we are not in a reverted trend that the number of assignments are already increasing. So I would call this a stabilized situation with some also price increases, which should lead then to more solid figures on prior year's comparison over the next quarters. Hard to state exactly whether our niche, the white collar niche is more affected than the blue collar reading, doing cross-reads throughout the sector. It looks like that the blue collar bottomed out. It dropped earlier and even deeper, but it bottomed out already last year and is now on a more solid trend when I do the cross-reads. Are we more negative in terms of our outlook? Well, here, at least one thing you have to bear in mind that we are focused on the German market. If you read -- cross-read peers, they do have some positive signals in different geographic areas. A lot of statements here reflect the improved situation in few parts of Europe, but more in U.S. or Asia. Will that somewhen also affect Germany? I do think so. Just hard to project when that will be. That might be already in second half year, but we took the decision to be more cautious on our outlook and rolling forward the experience, especially in permanent placement, what we saw in second quarter, where you saw, well, as I described, a quite passive behavior of corporations in Germany. A better situation would be an upside.

That's very helpful. And then maybe as an extension to my first question on your internal head count, it seems to be down only 1% year-on-year at the end of H1, which, of course, includes some contributions from acquisitions. But do you feel that you have now taken out sufficient amount of cost? And with temporary staffing and project management are going to stabilize, is it fair to assume that further cost reductions are no longer the priority and that you want to be well positioned to capture an eventual upturn? Because with your workforce only down 1% year-on-year, it seems a bit of conflicting to your outlook.