Brockhaus Technologies AG (BKHT) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Brockhaus Technologies Investor Update Call Full Year 2023. [Operator Instructions] Let me now hand the floor over to Marco Brockhaus.

Thank you, and good afternoon, everyone. Welcome to Brockhaus Technologies' Earnings Call for Fiscal Year 2023. Before we begin, I would like to point out that the slides we are presenting will afterwards be published in the Investor Relations section of our website, brockhaus-technologies.com. process. [Operator Instructions] Before we present our results, I encourage all you to review the legal notice on Page 2 of our presentation, which explains the understanding of forward-looking statements. Additionally, please refer to Note 6 of our Annual Report 2023 on Page 94 onwards for a description on alternative performance measures as well as the reconciliation of non-GAAP, GAAP figures. For information on risk factors that could cause actual results to differ materially from forward-looking statements, we kindly refer you to the section on risks and opportunities in the management report 2023, starting on Page 65. Flipping over to Page 3 and to give you a brief summary of what we have achieved last year. 2023 was another record year for our technology group. We have once again delivered highly profitable top line growth across all segments, and this despite lasting global macroeconomic and geopolitical tension. Brockhaus Technologies generated revenue of EUR 187 million in the fiscal year 2023, representing organic growth of 31% compared to last year. Fueled by the growth contribution of both segments, we once again exceeded our forecast 2023 by around 7%. Adjusted proforma EBITDA grew even stronger by 41% to EUR 67 million, corresponding to a high margin of 36%. Adjusted proforma EBIT increased equally strong by 41% to EUR 62 million, corresponding to a margin of 34%. We are once again reporting proforma figures as Brockhaus Technologies successfully completed 4 highly accretive add-on acquisitions within the Financial Technologies segment last year. To enhance the comparability of the periods to come, the proforma view shows our numbers as if the acquisition would have already taken place in January 1, 2023. From a non-proforma perspective, revenue is unchanged. However, adjusted EBITDA grew by 31% to EUR 62 million and adjusted EBIT also by 31% to EUR 58 million, corresponding to a 33% and a 31% margin, respectively. Even though I keep repeating myself, the operating development in 2023 as well as the growth forecast for the full year as well as medium-term outlook for 2025, which we will cover later in this presentation, clearly underline the resilience of our business model and strict focus on technology and innovation leaders and nothing else aside of that. Lastly, our financial reserves remain high at cash and cash equivalents of EUR 54 million despite having made significant investments for the 4 add-on acquisitions, our share repurchase program and further repayment of debt within our segment. Let me come to EPS and dividend. Moving over to Page 4 and a new overview that we have added to our presentation and which we feel should be in the center of attention of our shareholders. We always promised and preached that our interest as a team are deeply aligned with those of our shareholders, namely to create shareholder value. Why? Because we, ourselves, are shareholders of Brockhaus Technologies, ourselves, insiders, meaning our team, supervisory board and management of our subsidiaries own around 1/3 of the group. Our focus to continuously increase shareholder value can be best displayed by showcasing the development of our adjusted EPS over the past 3 years. Over this period, adjusted EPS increased by a CAGR of 77%. That means that the adjusted net income per each Brockhaus Technologies share is almost 3x as high as 2 years ago and twice as high as last year. This, of course, is calculated on the basis of net income attributable to shareholders. So the 48% of Bikeleasing's income that belong to minority owners of Bikeleasing are excluded from this figure. Personally, I do not know of many companies that were able to achieve such a strong development, especially over the challenging last 3 years. Also, as we get this question a lot, it always makes sense to look at the adjusted EPS as the non-adjusted figures are completely diluted by purely consolidation-related PPA amortization that has no CapEx need in the future. They only exist because our core business is to do M&A. Please always keep that in mind when looking at our EPS. Given the strong liquidity position, the very successful operative performance in 2023 and a positive outlook, we will propose to the AGM to pay out a dividend of EUR 0.22 per share for the fiscal year 2023, sooner than we had predicted when founding Brockhaus Technologies. The rationale behind this is manyfold: A, underlying the profitability and high cash generation of our business; B, reward long-standing shareholders with their trust in us; C, extend the addressable investor universe by dividend-seeking asset managers. With a corresponding total distribution volume of EUR 2.3 million, this dividend would however, be small enough that it does not hinder us to further conduct additional acquisitions in line with our acquisition strategy or do additional share buybacks. With this brief summary, turning over to the next page and handing over to Harald, who heads our finance department.

Thank you, Marco, and welcome, everyone. Let us jump right into the quarterly revenue analysis on Page 5. And today, to mix things up, let's first look, please, at the orange chart at the bottom of the page, indicating IHSE's top line development. Last Q4, IHSE was somewhat below the comparative quarter. However, the years' ending was exceptionally strong one year before. So the EUR 11 million in revenue end of this year or end of 2023 are still quite solid. On the top chart, you can see that Bikeleasing outperformed last year's fourth quarter by more than 50%. And that is where I would like to elaborate a bit about the company's business seasonality. In the last year, the supply situation with regards to bicycles was in part very difficult. Customers, therefore, tended to order bikes with more lead time in advance. As a result, the seasonality of Bikeleasing's business was somewhat evened out throughout the year. I mean, business volume in the warmer second and third quarters were still much higher than in the colder first and fourth quarters, but not as much as in the years before. This explains the growth trajectory of last year, where growth in the beginning of Q1 and in the end of the year exceeded 50 or 50%. In contrast, growth in summer was somewhat lower. Recently, the supply situation has improved substantially with many retailers holding large inventories. And as a result, Bikeleasing management expects customers to return to their historical purchasing behavior, so their long-term purchasing behavior. Therefore, we expect the business seasonality in 2024, so forecast period to be even more pronounced than in 2023. That is why in Q1 of this year, we do not expect substantial growth at Bikeleasing, compared to an extraordinarily strong Q1 of 2023. This, however, does not impact our forecast, which foresees further strong growth throughout the current year and also for the future beyond that. Hopping on to the next page for the regional sales split. First, to Bikeleasing, as always, no surprises here, the company does the business in Germany and Austria. Growth in top line was 37%, therefore, all relating to the EMEA region. At IHSE, growth was primarily driven by the U.S. and EMEA also showed a solid development compared to last year's levels. In the APAC region, revenue was a bit contracted, but you will hear more on that later from my colleague Yannick. Turning to the segment P&L table, in the first 2 columns, we see that Bikeleasing's gross profit margin increased from 61.1% to some 63.7%. This is due to the fact that the company acquired 4 out of their 5 external sales agencies during last year. As a result, sales provisions are no longer paid to these agencies, which decreases costs and those costs are presented in the P&L above gross profit. On the level of EBITDA and EBIT, the margins increased correspondingly with EBITDA margin being up 1.9% and EBIT margin up 1.7 percentage points. Proceeding to the next 2 columns to the right at IHSE, the gross profit margin outperformed last year by 2.5 percentage points, also on that more info later on in the call. This development was even better further down the P&L with EBITDA margin increasing by 3.5 percentage points to 27.4%, and EBIT margin also increased nicely. Further 2 columns to the right, in the central functions, expenses increased, which was caused by higher consulting fees as well as marketing expenses with the goal of raising the brand awareness and popularity of Brockhaus Technologies. In conclusion and summing up to the consolidated group level to the far right, revenue was EUR 187 million, showing a substantial increase of 31%. Gross profit margin was at 66.5% and adjusted EBITDA margin was 36%, bringing the group to an adjusted EBITDA of EUR 67 million. The group's adjusted EBIT of EUR 62 million corresponds to a margin of 33.5%. Last but not least, our cash balance as per end of December amounted to EUR 54 million, but Marco will get on more details on that later on. This concludes my part of the financial update, and I'm happy to discuss with you further later on. And for now, I'll hand back over to Marco. Thank you.

Yes. Thank you, Harald. On the next page, I would like to run you briefly through our financial leverage structure. End of last year, the debt from loans amounted to EUR 85 million. Therefore, when subtracting cash, we are left with a net debt from loans of EUR 31.4 million. Furthermore, adding EUR 18 million from our financial liabilities and EUR 9 million of liabilities from lease refinancing, brings us to EUR 59 million in total net debt. If you compare that to EBITDA, this corresponds to a leverage of 0.87x. As our limit for this KPI is some 2.5x, we consider our current financial position as more than conservative. Looking at the cash bridge, during the past year, we took several measures with regards to our financing structure. To put those into context for you, we thought it makes sense to discuss them in a cash bridge. What you see on this page is the disaggregation of the changes in cash by the major impact. The blue bar at the left indicates cash at the beginning of the year. The blue bar at the very right is cash at the year-end. First, we generated free cash flow of EUR 44.4 million, which is plotted as the first big green bar. We had cash outflows for income tax taxes of EUR 10 million and for interest and debt repayments of EUR 15.9 million. The sale of IHSE Real Estate brought in EUR 10 million. Due to our share being undervalued in our view, we invested EUR 11 million in buying back our own shares, leading to a corresponding cash outflow. Bikeleasing invested EUR 19.5 million to acquire 4 of their 5 sales agencies, which saves substantial provisions' payments going forward. The next bar to the right is labeled distribution to non-controlling interest, and needs to be explained a bit more detail. On the operating entities of Bikeleasing, 55% are owned by an intermediate holding company controlled by us, by Brockhaus Technologies. The remaining 45% are owned by the managing founders of the company and a co-investor. As a result of the successful and highly cash-generative business of the year, Bikeleasing made a cash distribution of EUR 35 million to its shareholders in the end of 2023. This means that 45% of that distribution equaling EUR 15.8 million were paid to those non-controlling interest holders, namely the founders and the co-investor, which reduces cash on a group level. The other 55% of the cash distribution equaling EUR 19.2 million were transferred to the intermediate holding company, which used the money to partially repay the last remaining acquisition financing loan from our takeover of Bikeleasing in 2021. The remaining debt balance of that subordinated acquisition loan after repayment is EUR 26.4 million as of year-end. For your later reference, we included a small organization chart above the cash bridge to visualize the payments involved. Please take attention on that. Altogether, we are convinced that we put our strong cash flow to the best use possible in the last year. I now hand over to Paul for more insights into Bikeleasing's development. Paul?

Thank you, Marco, and also welcome, everyone, from my side. As usual, let me start the operational deep-dive with a look at the significantly larger platform that we have, namely Bikeleasing. 2023 marked another record year for Bikeleasing in terms of its most important financial and operating KPIs. The interest in and market share of company bicycle leasing as an attractive financing solution and hence, a subset of the overall bicycle industry, continued to grow strongly. Bikeleasing managed to grow the number of broker Bikeleasing contracts in 2023 to around 151,000 contracts, which is approximately 28% more than the year before. At the same time, the number of corporate customers onboarded to this digital platform grew by around 14,000 individual corporates, reaching a new milestone of around 60,000 in total. Those corporates employ around 3.3 million employees that gain access to the Bikeleasing solution. Please note that this development last year marked the highest absolute onboarding rate of new customers that Bikeleasing ever achieved. As Harald already comprehensively covered in the key financial section, I just want to highlight one additional detail, namely the cash position of specifically Bikeleasing. The cash has remained broadly stable at Bikeleasing if you compare it to the end of 2022, despite the significant investments that have been conducted last year. To highlight them again, nearly EUR 20 million spent on the acquisition of 4 sales agencies, full repayment of the senior acquisition loan in the amount of EUR 10 million on the operational level of Bikeleasing, and lastly, a first distribution from Bikeleasing to its shareholders in the amount of EUR 35 million, which Marco just explained a second ago. This clearly underlines the high cash generation of the company in addition to its high profitability, as you can always see in our P&L. Turning over to Page 12 and now putting the operators glasses on, I would like to give you 3 examples from last year where we together with the management team have created significant value for the company and hence, also all shareholders involved. As mentioned several times already on the previous slides, we successfully acquired 4 previously external sales agencies last year and terminated the work with a fifth one. We did so by way of asset deals, meaning that we've not only acquired their business but also their respective sales colleagues. This then so-called internalization of the sales teams will allow us to better orchestrate the different sales channels that Bikeleasing is nurturing as well as better use individual strength of the people involved. For example, the differentiation between hunters and farmers as you can always see in sales. In addition, those previously external sales agencies earned a percentage margin for each and every bicycle that was ordered within their region, totaling around EUR 11 million in total commissions already in 2022. These commission payments would have grown pro rata the growth in our transaction volume, meaning number of bicycles times average price. And given the acquisition and termination of this system, will be saved from now on. The very accretive effect of those acquisitions can already be seen in the difference between our proforma and adjusted figures, which Harald presented before. Secondly, as we touched upon in earlier earnings calls already, Bikeleasing began to change their contract system beginning of last year, shifting from a previously fixed leasing factor to a so-called floating rate system. This means that the leasing factor flows up and down in accordance with the Central Bank interest rates. Leasing factor, just for your information in that respect means the implicit interest rate that a user, a consumer, pays on a monthly basis for our financing solution. You may ask yourselves why is this a big thing to highlight here? The reason is that in an environment of sharply increasing interest rates, a fixed rate system as we ran it in the past, basically squeezes your margin per bicycle. And this was the case in 2023, where we implicitly lost significant margin per bike as changing around 45,000 old, let's say, old customers as per the beginning of last year, naturally takes some time. As per end of last year, however, roughly 80% of all customers have already migrated to the new floating rate system, meaning that our interest rate risk is now close to being fully hedged, and the margin earned per bike will come back to its previous level. Lastly, in order to set up the business for its next growth stage, we early on decided to complement the founders and existing unit heads by several new C-level executives. After lengthy discussions and interviews and search processes, we can now happily say that the C-level is completed within Bikeleasing with the hiring of a Chief Technology Officer, a Chief Financial Officer, a Chief People Officer and a Chief Operating Officer. The last one, which -- of which will, however, only start in H2 because the termination period is a bit longer. This concludes the operator update from myself and Bikeleasing. And moving over to the next page for a similar update on IHSE, by my colleague Yannick, who heads our operations department. Thank you.

Thank you, Paul, and good afternoon, everyone, from my side. As an already strong first 9 months, IHSE further delivered a strong last quarter to achieve an overall revenue growth of 12.1%. This underlines that the demand for IHSE as a global technology leader in KVM technology and the growth tailwinds in its markets remain intact, and the rebound is continuing. As seen earlier by the regional splits presented by Harald, this was mainly due to a continued very strong development in the Americas, while EMEA was broadly on the same level as last year. Only the APAC region, especially driven by China remains more difficult given the decoupling tendencies from the West. But also, this below average growth in economic output had with crisis in the construction industry and the general reduction of investments by the local Chinese district governments. The adjusted EBITDA margin of 27.4% expanded by 3.5 percentage points as compared to the previous year's level of 23.9% despite significant investments for trade shows and now a finalized group-wide IT project. This is, of course, mainly due to the strong top line development and resulting fixed cost regression. However, additionally to the favorable top line resulting in EBITDA improvement, the IHSE gross profit has also improved. The gross margin level is back up at 75% due to a normalized supply chains and further design and product improvement. Moving on to the next page for a quick overview of the value that we are creating together with the IHSE management. Not only is the company on a continuous growth trajectory, adding to the top line while improving the overall margins, it is also investing in the future and market readiness. The product portfolio of IHSE was extended to include certified solutions, which is the base to be successful in multiple mission-critical environments, especially in the security and government verticals. In order to promote these products, we also have intensified our presence at relevant trade shows and we're full scale integrated as well as working together with experts and multipliers in this particular industry. As you can see in our published year 2023 report, we have already achieved significant orders in this area. The conventional product portfolio was extended to also include a solution for software-based KVM to be able to offer fully hybrid solutions to customers as we see a growing demand for more flexibility while still remaining all benefits of highly secure KVM systems. The IP portfolio that was acquired with the purchase of KVM Tech was overhauled and the new generation of IP-based systems is available in the market since the end of last year. This will also make us able to better address markets like in some countries in East Asia that are more sensitive to cost-efficient solutions with existing IP networks. As a brief outlook for 2024, it is worth to highlight the new generation of video codec JPEG-XS as an IP core, which will not only further increase the capabilities of our own product, but will also generate licensing fees when used in cases needing a strong and efficient video codec even outside of KVM technology. Finally, we have just finished implementing Step 1 of an increased automatization in our production facility in Oberteuringen, giving us not only additional capacity for continuous growth but also increasing the quality level of our products by reducing our production cost per piece. With this, handing over back to Marco for the outlook.

Yes. Thank you, Yannick. Flipping over to the last 2 pages of today's presentation, our recently published forecast for the fiscal year 2024 as well as our medium-term outlook for 2025. As already published by an ad hoc release on March 22, we expect another record year for Brockhaus Technologies in 2024. On the basis of its strong development last year and promising prospects for both of our subsidiaries, we expect to achieve revenue of between EUR 220 million and EUR 240 million with an over-proportional growth in adjusted EBITDA to between EUR 80 million and EUR 90 million. Please note that this forecast assumes that there will be no further change in the scope of consolidation within Brockhaus Technologies. The reason for this approach is the difficulty in predicting the nature and scope of future acquisitions. We do not believe that any estimate in this respect are sufficiently reliable even though we are constantly working towards finding the next hidden gem in the market. In order to provide additional transparency for our investors on the expected medium-term developments at Bikeleasing, IHSE and Brockhaus technologies, we published a medium-term outlook in 2025 in June last year. On the back of our strong operating performance in 2023 and a forecast of 2024, we are happy and proud to reiterate that we see no change in the medium-term outlook for 2025. By 2025, we target revenue to increase to a level between EUR 290 million and EUR 320 million. This compares to revenue of EUR 187 million last year. I think this underlines our growth ambitions with our group. Profitability is also supposed to continuously increase due to operational leverage, both on subsidiary level as well as considering the central functions cost of Brockhaus Technologies that do not grow in line with our fundamental business but are indeed scalable. We aim for an adjusted EBITDA margin of around 40% for the 2025 fiscal year coming from a proforma EBITDA margin of 36% last year. This would increase the adjusted EBITDA from EUR 67 million last year to a value of approximately EUR 120 million or more by 2025, nearly twice as much EBITDA as last year. As for our annual forecast, 2024, this medium-term outlook refers to the group as it stands. So again, assuming that there will be no change in the scope of consolidation. All in all, we are very proud of the strong development of our technology group over the last years and in 2023, especially when considering the challenging geopolitical and macroeconomic environment we are all facing. We are convinced of the resilience of our business model and our ability to source, acquire and successfully develop technology and innovation champions within the German Mittelstand. That concludes our presentation, and we are now happy to answer your questions. For that, I would like to hand over to the operator. Thank you very much for listening.

[Operator Instructions] And now we have the first question coming in, and it comes from Lukas Spang, Tigris Capital.

Congrats to the very good numbers for 2023 and also a promising outlook for this year. But if we look beyond 2024, I think you will be not surprised about this question. When I compare the expectations this year and for next year, we will see higher growth rate for 2025, if you take both the mid points. And we see also a higher jump in profitability for next year compared to this year. Can you please explain a little bit from your perspective and your expectations, why this is a realistic scenario?

Maybe to take that from my side, Paul, from a technical point of view, you're absolutely correct, if you take the midpoint of both ranges, that leads to a slight mismatch in growth rates. If I remember correctly, the jump this year would be a bit below the jump that would be assumed for the midpoint 2025. However, if you change the point to the lower, for example, this is being flattened out a bit. So A, please don't be too technical about it, because you can change it from the midpoint to other points in the range. The second thing is that we still see a challenging market environment out there right now, right? I mean there have been tensions in the past year, both as we said, macroeconomic as well as geopolitical, those have not really changed so far coming into 2024. So we are rather on the conservative side when we look out there. And yes, hence, have gone out with this outlook.

Okay. So you would see also a better environment for you on this already good perspective or this already good outlook if the environment will get better. So this would give another push from -- for you.

Generally, yes, yes, if the market environment is easier out there, then it also helps our business, of course. However, if, let's say, whatever type of geopolitical point vanishes from today to tomorrow, you will, of course, not see an immediate effect probably, but this will triple down through the market. Yes.

Okay. But the impression is that as an investor, we should rather expect the lower end of 2025 guidance than on the upper end.

We have not said this. The outlook for 2025 stands as we've put it out in June last year, if I remember correctly. And it's still the exact same range. The only thing that we can say is that our forecast for this year is how we've just presented it for the reasons just explained. And this is no, let's say, qualification if we're rather on the low or the upper end or in the midpoint, the range stands as we said it.

And the next question comes Lasse Stueben from Berenberg.

Just a specific question on IHSE. I mean APAC here has been weak for quite some time now. So I'm just wondering kind of what -- how you think about that structurally going forward. Do you still think there's going to be a recovery there? Or do you think that APAC for IHSE is really going to be a smaller geography and that you're going to focus your assets more in the U.S. going forward, given the strong growth rates you've seen there?

So thanks for the question. In general, we don't guide by segment. But what I can say about the region, APAC itself, minus China actually even was positive in 2023. And we see already for this year promising projects in countries like Vietnam as an example, or even Oceania as a border to APAC. So with that being said, APAC itself, we do further, let's say, see profitable and good business. For China itself, I mean -- China resulted in 2023 from a total top line of about 1.5% of their revenue. We still have partnerships in the country. We still actively address projects. We actively still get requested to bid for projects. So there will still be a business, but it will not be as strong as it is in the last, let's say, 3 or 4 years ago, right? But we still address the market, nonetheless. Now with that being said, we also, because we see the tendencies of China having this negative outlook in the last 2 years, of course, and for the other regions. And you can see this by the very, let's say, jumps or big jump we had in the North American region to offset these, let's say, tendencies we see in China. Okay.

Makes sense. And then just one more. Can you just give an update or color on how you see the market for acquisitions at the moment? I know it's a bit challenging, but I guess with -- potentially with rates coming down, et cetera, maybe the market is a bit more receptive to acquisitions. I'm just wondering what you're seeing on that front.

Yes, Marco here, let me jump on this. It's -- I think, rarely, you see really very good companies, especially when we're talking about software as a SaaS business model paid for 20x to 30x EBITDA, which is in our view crazy, and we're not ready to do this. We are very strict on that as we always were and want to be. And therefore, besides that you see, I think, more stuff out of our range, again, highly profitable, growing technology and innovation businesses with B2B business models. And that's for now. Yes, we do always see deals, but if it's SaaS and software as a service and recurring revenues it's the multiple region we are talking, I just mentioned. And therefore, we are not doing this. And all other acquisitions we looked at, maybe, Paul, you can go into a detail of what we looked at in 2023 and what we're seeing right now. But that in overall, yes, that's the answer to your question. I think there is a big time lag bigger than ever before between interest rates going up, crisis, taxation, inflation, recession and so on and so forth than we've ever before. I mean, that businesses since '97, the dotcom crash, the Lehman Brothers crisis and let's say, Corona and then Ukraine and energy prices crisis went up. That is all much longer than before. I expected H2 last year that prices in general came down or to come down, but they didn't for very, very businesses we are looking at. I think -- I hope this answers your questions, a long answer, but that's my overview on that.

And maybe just to add with a couple of anecdotal examples from last year, I think my speech has been exactly the same for I don't know how many earnings calls that we see a black and white scenario out there. Black meaning that any deal that is, let's say, not software and where you would have seen -- or you also see impacts on the prices that are being bid are rather being canceled, than close to a lower valuation. Why? And this is maybe a, let's say, a function of our very strict focus. If you are the owner of a technology or innovation-driven business that has high gross margins that has a rule of 50, let's say, 20% organic growth plus 30% margin plus a high cash conversion, and you're not forced to exit given age or disease or whatever. Why should you sell now accepting lower multiples versus just taking it on for another 1 or 2 years and then try it again? And the wide scenario was everything software related, as Marco said, where you saw multiples basically in all cases, definitely north of 20x, up to 30x EBITDA for very, very, very small software businesses, where we are not, let's say, willing to hand in those kind of offers. This is what we have seen since a couple of months already. The market now with all the statistics coming up and volume in the M&A market down and number of deals also down, the market is getting more honest about it, as we have been over a month already. We have looked at businesses. We have looked at a brilliant sensorics business, so to say, we would need to describe it colors just for liquids and not air, a process that was pulled from the owners because they didn't like the valuation levels currently in the market. A family-owned generation med tech business, also quite sizable that we bid on. Same reason pulled because they didn't like the valuation environment out there right now. We looked at several software businesses, as I said, where the prices got so heated that we moved away from them. We just recently looked at a very interesting potential add-on that we could have done for one of our businesses, small, but meeting all our criteria. So margin tick-marked, growth even higher than what we are looking for. We did a full due diligence on that. So as usual, commercial due diligence, technical due diligence, financial due diligence, legal due diligence, and tax diligence and voila, in the tax due diligence, which has usually just ticked the box, if there are any risks involved or not, there was a risk popping up that was so material that it could cause the whole business to go into insolvency if it pops up. So on the very first look at this business and the deal opportunity, this could have been a brilliant deal. And if you would have asked me a month ago or 1.5 months ago, I would have been very positive that we announced this one soon. However, in the end, and that's the nature of our business, something popped up, and we moved away from the transaction. So just to give you some anecdotes and feeling what we -- what our daily business is. But we are constantly looking, we are sourcing. We are going to trade shows, shaking hands with entrepreneurs, et cetera, et cetera, trying to get our foot into the door with very brilliant technology leaders out there. And yes, but we will remain as strict as before. And we are -- we have a key benefit and that is we don't have the pressure structurally to deploy capital. And this is what you see with some typical private equity funds out there. They really need to invest now, right? They -- in some instances have no other chance than deploy capital. We can remain as strict as before and just, let's say, pull the trigger when we are very much convinced by the transaction situation that we have in front of us.

Especially, and maybe to add from me, Marco, I think the repurchase of our shares was a good deal because when I see out of all the other deals we know what we are buying.

Understood. Maybe just one more question. Can you just help us on the dividend going forward? I mean, should we anticipate -- I mean, quite a small dividend to start off with, but should we anticipate a similar payout ratio for the coming years as for '23? Sorry, you might have mentioned this, I might have missed it.

No, we didn't. But as we wrote in our talk, we want to pay out dividends from now on and investors could expect increase in dividends. So this is our comment on that. Anything to add, Marcel or Harald?

Yes, I mean just -- this is Harald, just to add. No, we do not target for a certain payout ratio, but for steadily increasing dividend.

At the moment, there are no further questions. [Operator Instructions] And a follow-up question comes from Lukas Spang, Tigris Capital.

Yes. One follow-up. In terms of PPA depreciation, should we expect any change for this year that it will come down? Or is it expected to be on the level of 2023?

So in the long term, they will, of course, completely vanish because PPA amortization, you only have after an acquisition, a business combination. And for all of the acquisitions, so for IHSE and Bikeleasing, easiest way would be to just look at the reports. So for IHSE, it was in 2019. And for Bikeleasing, it was in 2021. And there we disclose, of course, what the useful lifetimes in years that we assumed for the PPA assets are, and then you can basically buy assets, build a depreciation schedule, if you want. The fact why those are, let's say, economically not relevant to us and why we adjust them, is that clear? Or should I touch a point on that, too?

No, no, that is clear. But normally, there are also different parts of PPA. Some are going longer; some are going shorter.

Absolutely, yes. We got like customer bases of Bikeleasing, they had a different assumed useful life, so for this theoretical depreciation like in IHSE. So in the report, I don't know them by heart actually. And except for customer bases, we identified basis technologies, brands and domains or stuff like that, that are the usual PPA assets. Until a few years ago, you would call them goodwill, but the standard setters said, no, please allocate the value to some theoretical assets.

And now we're coming to the next questioner. It is Matthias [indiscernible].

Congratulations to the good result. I'd like to ask about IHSE and what your mid- to -- or let's say, midterm outlook is on maybe how -- what role IHSE plays sort of in the 2025 outlook? The company has gone sideways with a bit of volatility over the last couple of years and has benefited from an add-on acquisition. What do you expect how this business should develop in the midterm?

Marco here. We do not predict single companies. So I can't answer to that, but to your question, IHSE has a long track record of growing the business nicely and with strong EBITDA and strong cash conversion to cash flow. And because of Corona and the pandemic and the ban to travel and the ban to meet people, for the sales, it dipped in the Corona years. But as Yannick mentioned before, came back very nicely, and this continues as we see in the 2023 results. And we look forward with no further travel ban or no further pandemic or whatever that IHSE is well positioned in the market also with the IP software business we bought in 2021 to fully serve the market.

Okay. I have another question. About your leverage, can you help us understand what debt is on sort of the group level and what is on the level of the operating companies because I think you only referred to net debt on a consolidated basis?

Yes, certainly. This is Harald. As the question makes a lot of sense, we put a table into our annual report where you can look that up. You will find it on Page 99. And there, you have the figures by business segments, of course, and you have the financial -- so the cash allocated to the business segments. You have financial liabilities, both without and with lease refinancing, of course, lease refinancing only relating to the Bikeleasing business, so to our financial technology segment. And when you look at the figures for financial technologies, of course, they are allocable to the shareholder to 52% because there are 48% non-controlling interest in Bikeleasing. For the central functions and for IHSE, they are all allocable to shareholders or to the AG or however, you will. And there is one specialty at Bikeleasing, but that is also in the management report, I'll just look up the page. At Bikeleasing, there still is a subordinated loan that was mentioned before by Paul, I think, in the call of some EUR 26.5 million, I think. And that is allocable to shareholders to some 95%. If you remember the chart can maybe just hop back to the cash flow -- yes, right. Can you see the cash bridge again? Can you see the cash bridge?

Yes, I can.

So what you see there is the intermediate holding company in which Brockhaus or BKHT holds 95%, that one has the subordinated loan of a remainder of some EUR 26 million, and that is all the information we need to allocate the debt throughout the segments or the individual companies.

Can you say it clearly here on the call, what is the net debt on group level, not the consolidated number, but just the group level?

I don't have it in my mind if you want the figure allocated. So just Bikeleasing times 0.52 and stuff like that. I don't have it in mind.

Yes, I'm looking at the table on Page 99, and it looks like there's EUR 25 million cash and about EUR 7 million financial debt. So on the group level alone...

Do you mean Brockhaus AG level. So holding level...

Well, central functions. It's reported as central functions on Page 99.

Yes, okay. That is correct. That's on group level but that is the holding entity. So the ultimate parent company indeed has some EUR 25 million in cash and financial liabilities of EUR 6.9 million. That is correct. You want to know what the EUR 6.9 million is? That -- we do not have any loans in the AG, so in the ultimate parent company. But that is a success fee liability of the broker that brokered to us the Bikeleasing deal back in 2021. And that broker is entitled after 10 years to have a share -- a small share in the increase in value of Bikeleasing. And after 10 years, Bikeleasing needs to be valued and the broker will get the amount of a percentage of that value increase. And you -- at each reporting date, you have to report that obligation as a liability. So it's not a debt tranche or something like that.

Is that a maximum amount? Or is that the current estimated amount?

That is the current estimated amount, and it increases over -- yes, unwinding of a discount so it has an interest component, of course, but also when -- I don't know, Bikeleasing puts out a new business plan or we do a new valuation of Bikeleasing, we have to revalue or reassess that amount accounted at fair value.

Okay. Maybe one more question. You often refer to potential initiatives to expand Bikeleasing into new countries or new product categories? How advanced are those plans?

To maybe remind you of our strategy waterfall within Bikeleasing priorities, number one and two are to get as many corporates on our platform as possible. And then secondly, increase the usage rates within those already won corporate. Why? Because it's a land-grabbing phase that we are in, and we are very well positioned. And as I said before, we have absolutely, in absolute terms, onboarded more corporates than ever last year. Why is that so important? Because once we have them on the platform, we see no churn. I mean, of course, there is churn small businesses like, I don't know, 3 people, electrician businesses. They sometimes just close down or go out of business, but there's no active churn where a company goes to a competitor of ours. There's no reason to do that. So you need to collect as many of them as possible. And this is the clear priority #1 for everyone within Bikeleasing. So anything that goes beyond that in other strategy initiatives cannot harm our strategy, point number one, which is onboarding rate. However, we are, of course, looking at and those are the points three and four or is probably both on the same level of relevance, is indeed internationalization beyond Germany and Austria; and secondly, adding other benefits to our very valuable client base that we have already on the platform. And those can go in very different directions, right? We've often talked about computer leasing where you can lease an iPad or an iPhone or a gaming laptop basically in the same way as you can lease a company bicycle. You could also go in other directions like vouchers in Germany, you have the option to, until a certain euro value, give out vouchers to your employees without taxes or meal subsidies, what the big French guys like Sodexo or even [indiscernible] are doing or there are many, many more benefits that you could offer, and that's what we mean with going into the multi-benefit direction. How far are those progressed? We have them on our radar, on our road map. We are currently constantly evaluating them and also building the basis to be able to offer that in the future. What I mean with that is technological basis to offer it in the future. I mean, we have internalized also a lot of developers to do that. But also, we are in parallel looking at many other add-on opportunities, right? When you talk about internationalization, there's always the question, do you enter a market organically and just try to fight for your market share? Or do you acquire someone by way of M&A? And we have several contacts or several companies in other countries. But in the end, it needs to make sense. And as I said before, it cannot harm our priority #1, which is onboarding of new clients. And in the end, it's always a capacity question. I cannot tell you when exactly we will launch with new markets or with the new products, but it's being evaluated, and we are prepared for it.

We have another questioner on the line. It is Aakash Vanchi Nath from P&R Real Value.

Hello, everyone. Congrats on the strong results. A question on the same topic. It seems like Bikeleasing is setting up a resale business of return bikes that earlier or up till now is outsourced. Could you talk a bit about the motivations behind that? And also related to that, there was an impairment loss on bike returns that was reported. Could you talk about that, too, please?

Yes, maybe to take the first part of the question on why we set up a, let's say, resale focused subsidiary, the reason for that is quite easy. The contracts that we have or that we broker with Bikeleasing run for 3 years. And this means the bicycles will come out of the contract after 3 years' time. In 90% of the cases, those bicycles are being taken over by their actual users. So when you have rode your bicycle during lease term, you typically buy them out. Why is that? Because, a, you either want to continue riding them or b, which is also often a case, you know that the purchase price that we offer our users is lower than what they would achieve if they just sell it on the secondary market themselves, let's say, on eBay, for example. So many of our users buy the bicycles and then sell them on at a profit over the secondary market. But 10% out of those bikes come back to us Bikeleasing. And as you can imagine, if we -- if the, let's say, growth in returning bicycles is currently growing with, let's say, a time lag of 3 years. So the growth rates we have seen in new bicycles 3 years ago is the growth rate we are now expecting in the returning bicycles. And what are we doing with them? We, of course, don't want to have them on our balance sheet, even though we will always have some on our balance sheet for time reasons. But we sell them off. We sell them off to a variety of different platforms and retailers. Retailers really meaning retailers or bicycle retailers purchasing used bicycles from us. And platforms, meaning they are dedicated, let's say, used bicycle platforms popping up everywhere. I think the most dominant one there is out there is called Upway, heavily venture-financed French company. There is another company called Rebike in Germany, but there are several ones that actively purchase use bicycles to put them on their platform. And we're also now selling already used bicycles to other European regions like Spain or I think we've sold to Denmark. And we are in contact with many different platforms in many different regions. But given the growth in units that come to Bikeleasing, this, of course, takes up more and more, let's say, operational capacities. And what we've done for this reason is that we have set up a whole entity for it, who should take care and is taking care now of this specific piece of the value chain, namely the returning bicycles. What we, I think, have also discussed earlier in some calls already is that this returning bicycle point is margin dilutive for us. If you look into our financials, you see that we earn a profit on them. However, the percentage gross margin is significantly lower than our brokerage business. right? So we, of course, also have an incentive to somehow solve the issue of why do they actually run through Bikeleasing? Or can you maybe find a solution where those returning bikes go directly to other platforms, and we don't even have them in our numbers anymore. But this is something we have on our road map for the future. The reason why we founded a subsidiary for that is just to bundle all the activities that go hand-in-hand with those returning bicycles, that's the whole reason.

And for the second part of the question, this is Harald. I mean, as we wrote in the report, the lead times to resell the bikes the really small fraction that gets back to the company, they have just increased. As I said before, the inventory levels of dealers everywhere, at least across Germany, are relatively high. And when your resale times decrease, of course, you have to do impairments on your inventory stock keeping, and that is what we reflected in the last quarter.

Is that an accounting calculation? Or is that actually because you expect not to be able to resell those bikes?

Stock, we, of course, expect them to resold. However, when they are on your -- in your inventory for longer, the risks associated with the reselling of those bikes increase, and you have to put in a correction on your inventory and that goes through profit or loss, namely in material expenses.

And then one last follow-up. In case in the next, let's say, 2 years, you are unable to find acquisitions because of the high multiples, then as you have done so far, like allocate capital efficiently, but what would be the sum, if you could talk about what would you do with the excess cash -- significant cash that the business generates?

Marco here, repurchase shares, pay dividend, do add-ons, maybe start with the latest -- later ones. We are looking currently and also last year for add-ons, and we did 4, I think, very accretive add-ons with Bikeleasing, buying those 4 sales agencies for a very, very, very accretive deal. As mentioned earlier, I think by Paul, the provision were roughly EUR 11 million in 2022, minus some personal stuff for sales. I think that's very, very accretive if you imagine that we paid roughly EUR 20 million.

There are no further questions.

Okay. All right. If there are no further questions, I would like to take the opportunity to thank you all very much for attending today's earnings call of Brockhaus Technologies. I would like to use this stage a moment to thank our employees for their outstanding work and performance as well as our shareholders for their continued trust and support. From my side and the whole team. Goodbye, and have a great day. Thank you.