Brockhaus Technologies AG (BKHT) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and welcome to the Brockhaus Investor Update Call. [Operator Instructions] Let me now turn the floor over to Marco Brockhaus.

Yes. Thank you very much, and good afternoon, everyone. Welcome to Brockhaus Technologies earnings call for the first 9 months of the fiscal year 2025. Before we begin, I would like to point out that the slides we are presenting will afterwards be published in the Investors Relations section of our website, brockhaus-technologies.com. After our presentation, we will open the call to questions from your side. [Operator Instructions] Thank you very much in advance. Before we present our results, I encourage all listeners 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 consolidated financial statements for 2024 on Page 93 onwards of the annual report 2024 and Page 13 onwards of our quarterly statement for the first 9 months of 2025 for a discussion on alternative performance measures as well as reconciliation of non-GAAP figures. For information on risk factors that could cause actual results to differ materially from forward-looking statements, we kindly refer to the section on Risk and Opportunities in the Management Report 2024, starting on Page 64. So turning to Page 3. Let me briefly summarize what we achieved in the first 9 months of 2025. Despite the continued downturn in the economic and consumer climate, we were able to hold our ground. Bikeleasing continues to invest in its long-term growth strategy, transforming from a single-product company focused on company bike leasing into a multi-benefit platform. As part of its international expansion strategy, Bikeleasing has also taken a stake in the U.S. company right tender, seeing this as an opportunity to create valuable synergies and to leverage its own expertise in company bike leasing in the United States. IHSE is driving the continuous development of its technology and increased its gross profit margin in the third quarter of 2025 through an improved product mix and customer mix, primarily resulting from the growing defense business. For the current fiscal year 2025, we expect an organic revenue growth of 10% to 15% between EUR 225 million and EUR 235 million despite the persistently challenging economic environment, as said before. Against the backdrop of investments in Bikeleasing's long-term growth, we expect an adjusted EBITDA of EUR 50 million to EUR 55 million for the fiscal year 2025. Brockhaus Technologies generated revenue of EUR 182 million in the first 9 months of the 2025 fiscal year, corresponding to an organic growth of 3.6% compared to the prior year period. Adjusted EBITDA and EBIT turned out to be 28% and 33% lower than last year, which was mainly driven by Bikeleasing's investment in its long-term growth strategy. Flipping to the next slide, let us look at how revenue developed on a quarterly basis. At IHSE, on the bottom of the page, while the first quarter was below last year's Q1, in the second quarter, we saw a positive development and revenue exceeded prior year by 13%. The third quarter was down by 30% compared to Q3 2024 due to project-related shifts and a general reluctancy to invest in many industries. Bikeleasing on the top of the page in the first quarter was up by 11% compared to Q1 2024. In the second quarter, revenue was mostly on the same level as in the second quarter of 2024. The third quarter was up by 12% compared to Q1 -- Q3 2024. The key factor for growth was a significant increase in revenue from the sale of bikes at the end of the leasing term. In addition, the new partner participation model, which went live in the beginning of August, also had a positive effect on revenue in the third quarter of 2025. I will now proceed to the next page for the regional sales split. First, the Bikeleasing. No surprises here, the company has a business in Germany and Austria and growth in revenue was 6%. Overall, IHSE revenue was below the previous year's level compared to the first 9 months of 2024. In EMEA, revenue was down by 14% due to generally subdued investment activity in the market. The same applies to APAC, where revenue was down by 49%. In contrast, revenue in Americas region rose by 17%, driven by the growing defense business. Turning to the profit and loss table. In the first 2 columns, we see that Bikeleasing's gross profit margin was below last year's level at around 61%. Main reason for this was the increased revenue share of resale proceeds, which generally have significantly lower gross profit margin than the segment's other revenue components. EBITDA and EBIT margins were below prior year's level in addition to the lower gross profit margin. This is due to planned higher personnel and other operating expenses related to the long-term growth strategy of Bikeleasing aimed to transforming the business from a single-product company like Bikeleasing provider into a multi-benefit platform. Strictly prioritized growth initiatives in this regard manifested in higher marketing expenses. The rise in expenses primarily attributable to the acquisition of Probonio and the establishment of Bike2Future for marketing and broking used bicycles via B2B and B2C channels and the associated growth measures. Proceeding to the next 2 columns to the right at IHSE at 83%, the gross profit margin was significantly above the comparative period level of 74%. The rise in own work capitalized had a positive effect on the gross profit margin. This was primarily attributed to an increase in development investments in the new product generations comprising hardware and software from IHSE and KVM tech. Even excluding capitalized own work, the segment's gross profit margin reached 74%, up well above the prior year period when it was at 69%. The main contributing factor was an improved product and customer mix, particularly driven by IHSE growing defense business, which had a positive impact on the segment's gross profit margin. The adjusted EBITDA amounted to EUR 3 million with an adjusted EBITDA margin of 12%. The main reason for this decline was lower revenue, while fixed costs, particularly personnel expenses and other operating costs remained largely in line with the prior year period. In the third quarter of 2025, the management had already implemented significant measures to reduce fixed costs across personnel and other operating expenses, which are expected to take effect primarily in the fiscal year 2026. Moving to further columns to the right in the central functions, expenses were lower compared to the first 9 months of 2024, primarily due to lower personnel and other operating expenses. In conclusion and summing up on the consolidated group level, revenue was EUR 182 million, and gross profit margin was at 64%. Adjusted EBITDA margin was 27%, bringing our group to an adjusted EBITDA of EUR 49 million. The group's adjusted EBIT of EUR 43 million corresponds to a margin of 24%. Free cash flow before taxes was EUR 18 million and below the prior year level due to lower operating income and an increased refinancing backlog. On the next page, I would like to run you briefly through our financial leverage structure. End of September, the debt from loans amounted to EUR 69 million. When subtracting cash of EUR 38 million, we are left with a net debt from loans of EUR 31 million. Adding EUR 19 million from other financial liabilities and subtracting EUR 5 million of net debt from lease refinancing brings us to EUR 45 million in total net debt. If you compare that to adjusted EBITDA of the last 12 months, this corresponds to a leverage ratio of around 1x. As our limit for this KPI is some 2.5x, we consider our current financial position as more than conservative. This concludes the first part of our presentation. I'll now hand over to Paul, who is in charge of our acquisition team. Paul?

Thank you, Marco, and good afternoon, everyone. As usual, let me start the operational update with a brief look at Bikeleasing. Bikeleasing continued to grow its customer base throughout Q3. The number of corporate customers onboarded to Bikeleasing's digital platform now stands at around 81,000 firms with around 3.9 million employees behind them, representing a year-over-year growth of 15% and 7%, respectively. As in the previous quarters, the growth was particularly stemming from SMEs, as you can see here. At around 111,000, the number of brokered bicycles in 9M was below the previous year's level, primarily due to extreme discounts within retail and an increasing number of block customers due to deteriorating credit scores in Germany. I have already explained during our last earnings call why severe discounts are negatively affecting newly leased bicycles, but let me repeat it once again as it is not necessarily obvious at first sight. Irrationally, a lot of retailers are not discounting bicycles that go into leasing programs anymore to counteract the commissions of leasing platforms. Consequently, if you get offered, for example, 50% discount on cash purchases compared to 30% savings on the nondiscounted price through leasing, it, of course, makes more sense to buy than lease, at least if you have the disposable income to do so. This dynamic is observable when looking at the average price of a bike financed through Bikeleasing, which has not seen a large decrease over the last months in contrast to the overall market, meaning that heavily discounted bikes are, in fact, not being leased. In addition, to remind you of the strong seasonality of Bikeleasing's business, the 9-month period has usually accounted for 80% plus in the last year, even increasing its weight to 89% in 2024, as you can see on the right-hand side. Finally, the growth of corporate customers at Probonio, the company we acquired in April last year for multi-benefit management, is also continuing its positive momentum. Since we acquired Probonio in April last year and started upselling at the end of August last year, we've grown the number of corporate customers by more -- by nearly fourfold from around 800 to now 3,100 by the end of September. Nevertheless, just looking at the number of Bikeleasing customers we have, you can see that there is clearly some significant way ahead of us. Moving to the next page. Since the acquisition of Bikeleasing in 2021, just to remind you, we kept our 4 strategic pillars for growth unchanged. First, increasing the number of corporate customers onboarded to our platform. Just as a reminder, we started with 25,000 corporate customers, and we now stand at 81,000 customers; second, increasing the usage rate within employees of already onboarded corporates; third, adding other non-bike benefits to the offering, meaning Probonio; and four, internationalizing the business. After having started internationalizing with the first organic step to Austria in 2022, where Bikeleasing holds a leading market position today, we are very happy to announce the next step with our investment in Ridepanda in the United States. Ridepanda today is the leading provider of micromobility employee benefits in the U.S. Through its digital platform, Ridepanda enables its corporate customers to offer their employees the flexible subscription of bikes, e-bikes and e-scooters. In contrast to corporate Bicycle leasing in Germany, as we do it here with Bikeleasing, the U.S. does not allow to finance the monthly rates by way of salary sacrifices, which is why Ridepanda customers sponsor the monthly rates for their employees. Those customers, you can see here on the page as well and include the likes of Amazon, Meta, Google and also public entities like the city of Seattle. Bikeleasing acquired a minority stake of around 7% in Ridepanda and is looking to apply its expertise from the more mature German and Austrian markets now also to the U.S. With this, turning over to IHSE for a similar update. As presented earlier, revenue at IHSE was down 12% year-over-year. However, despite the revenue decrease, gross profit of IHSE was broadly stable in absolute terms, resulting from a significantly increased gross margin. You can also see that when looking at the gray part of the chart on the right-hand side here. This gross margin increase was significantly affected by IHSE's growing share of defense revenue, which reached around about 45% in the first 9 months of 2025. As you might remember, some 3 years ago, we took the strategic decision to obtain specific defense-related certifications and also invest into business development activities in that market, which now start to bear fruits. Geographically, both EMEA and Asia Pacific were down year-over-year, but Americas again benefited from our decision to invest heavily into the defense vertical. This concludes my section, and handing back to Marco.

Thank you, Paul. Flipping over to the last page of today's presentation, our outlook for the fiscal year 2025. As mentioned at the beginning, we expect revenue between EUR 225 million and EUR 235 million, corresponding to solid organic growth of 10% to 15% compared to fiscal year 2024. For adjusted EBITDA, the group plans a range of EUR 50 million to EUR 55 million. As part of the ongoing transformation of Bikeleasing from a single-product provider to a multi-branded platform, the fiscal -- the 2025 fiscal year is expected to include significantly higher expenses for personnel and other operating costs. These increased expenses are primarily driven by strategic growth initiatives, particularly the rollout of the digital multi-benefit platform Probonio.de and the development of the used bike sales platform, Bike2Future.de, established in 2024. As part of its international expansion strategy, Bikeleasing has also taken a stake in the U.S. company-wide panel, seeing this as an opportunity to create valuable synergies and to bring the experience gained from Bikeleasing's business model into the United States. IHSE is and will remain well positioned for the long term due to its leading technology position in the KVM sector. With a fully packed pipeline of new product innovations, IHSE is focused on the future, in particular, the government defense segment is currently performing well. From an eagle-eyed view, I would say our technology group continues to be well positioned for the future by keeping a scalable and cash-generative business model. Thanks to regular distributions, even also this year, we have been able to gradually repay acquisition loans and expect to reach cash compounding mode starting next year. The development of the share price is disappointing and at the same time, difficult to comprehend when comparing the current market capitalization of our company with the value of our subsidiaries. I'm convinced that despite a very challenging economic environment, especially in Germany, we have set the right course to achieve sustainable growth and create long-term value. Please note that this forecast assumes that there will be no future 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 estimates in this respect are sufficiently reliable even though we are constantly working towards finding the next hidden champion in the market. That concludes our presentation, and we are now happy to answer your questions. For that, I would like to hand over back to the operator. Thank you.

[Operator Instructions] And we have a question coming from Sebastian Weidhüner from Pelodin Asset Management.

So Marco, you mentioned the share price. And even after the goodwill write-downs, the auditor recognized valuations of Bikeleasing and either they're far above the current share price, more than double, I think. So what are you planning to do to finally close this gap because we have this now since a few years? And how do you think about to unlock the underlying value for these 2 companies for shareholders?

Yes. Thank you for the question. Well, to continue drive earnings and to invest into the future of the companies, right, as we do with Bikeleasing, as we do with IHSE. And as you talk, I think, frequently, if not every week with our Investors Relations Manager, Florian, you know well about what we do and what we plan to do in terms of what I just said, investing in the future of the companies, which we do, which we did and which we will do. And I do not understand that market doesn't see the lack of valuation. It's pretty obvious, as you just mentioned, but what can I say to the market? That's a good question. It is what it is. We can't rise the share price. We can buy back shares, what we did at EUR 22 a share a year ago or 2 years ago. And that unfortunately did not pay out, and we most probably will rethink that situation once we allow to do.

Yes. I mean we saw an M&A inbound in Q4, right? And maybe when there's a possibility to unlock the value, maybe it would make sense to think about it. But another point. So on LinkedIn, I -- yes, yes, please.

Sure. I mean we did very well with Palas where we made quite a fortune on that investment. And I think we were very happy, and I think we did very well, right? I mean what we invested and what we achieved with the company was amazing. We doubled sales and EBITDA within 4 years and more than threefold the investment. However, I mean, it's -- if there's opportunities, we will look at it, but this is for now what I can say.

I mean on LinkedIn, I saw very interesting. So in the Brockhaus Holding, you have hired Alexander. Previously, he was CFO, Group Germany at Volaris and Volaris is part of Constellation Software. So maybe you can say something what does this addition mean for your organization.

Just to back up the financial manager, Yannick Walter. It's just nothing does mean -- if you mean in terms of Constellation Group, we sold the business to Constellation Group a couple of years ago in the funds at business, but that's -- I wouldn't conclude any strategic shift or by his hire, not at all.

Okay. So maybe one operational question. So you mentioned the transition to the multi-benefit platform. And I mean in the case, it's Probonio. So you now reported 3,100 corporate customers. So maybe you can give us a number how many employees these clients represent? And for the moment, what is the annualized recurring revenue from these 3,100 customers?

We don't guide on...

Yes, Paul, you can jump in.

We don't guide on each company. So with 3,100 corporate customers, we did well, but we believe that the investment we just did will hopefully bring more customers to Probonio and with that more paying employees or paid employees for the software, right, using the software. So this is where we stand, and we don't guide Probonio.

Yes.

Just to add on there and also the employee number, we don't disclose. We can think about if we want to do that in the future, but there's also a difference between employees behind those companies and activated employees because we only earn, of course, fees on activated employees and not everyone. So -- but maybe a hint, if you look into our revenue splits that we have in the reports usually, there is a line called SaaS revenues, if I'm not mistaking. And there is no entity within Brockhaus earning SaaS revenues than Probonio.

Yes, I saw this, and I was surprised that this number was much lower than I would expect it. So maybe 3,100 customers times 30 employees times EUR 40 per employee would mean EUR 4 million revenue for Probonio, so annualized, but the number was quite smaller because of this, I'm asking, so how many employees and what revenue is behind this 3,100 corporate customers?

I think we are going in circles here. The revenues, you can see from our revenue splits in the report. And if you have had a look at this, you know the revenues. And on the employee number or actually not the employee, but the activated employee number, which is the relevant would want where we earn revenue on, we don't guide that.

Okay. But to get it clear, so are all 3,100 customers are paying ones? Or do some companies have kind of free plan?

There might be a couple in there from history where they are for some modules not paying something, but it's definitely the exception. But the difference is that even if you have a company with 100 employees and they just offer it maybe to 25 people in the beginning, you only earn on those 25 and not 100.

The next question comes from Lasse Stueben from Berenberg.