CEWE Stiftung & Co. KGaA (CWC) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the earnings call of CEWE Group following the publication of the first quarter figures of 2026. I would like to welcome CEO, Thomas Mehls; and CFO, Sirka Hintze, who will speak in a moment and guide us through the presentation and the figures. But before I hand over to the Management Board, [Operator Instructions]. The recording will be stopped before the Q&A session. And having said this, Mr. Mehls, the stage is yours.

Thank you very, very much, and a very warm welcome to all of you. Yes, we appreciate, of course, if you switch on your video, we're photo company, Sirka, right? So we are living in pictures and video as part of that. So thanks, Robert, for doing so. We appreciate it very much. So welcome to this Q1 earnings call and Sirka, we have a very special earnings call this morning.

Yes. So, I guess we made our first quarter quite exciting.

Yes, I hope so. And this is why when we look at the agenda, we start with the latest news hot off the press, so to speak. You probably have all noticed our communication, which we pushed out yesterday, and we had to push out yesterday actually because we concluded the deal in the Commercial Online Print. Then we go through the results, the corporate development, financial details and it will be followed, as always, by a Q&A session. But let's start with what we have communicated yesterday. We are in the process of selling our Commercial Online Print business segment. We took the decision to sell it. We signed the deal yesterday, and we are in the period now to wait for the closing of that deal. What is our Commercial Online Print business segment? That is the business segment with the brand SAXOPRINT, Viaprinto and LASERLINE. These are brands which help people to print their business cards, their brochures, their flyers, their flags, bags, basically promotional material in a wider range. What we do basically is either large format or paper-based printing business there. And just let me go through a little bit of the rationale here. What does it mean? It means focus. This is the main message we want to convey here. We want to focus on our core segment, which is photofinishing. We are the leader of premium photofinishing products. And with this deal, we want to focus management attention, but also capital to grow organically and nonorganically, we come to that one, our photofinishing business. That is the main rationale for why are we doing that. Also, we are increasing profitability. On a pro forma basis, looking back at the '25 figures here, so we took out the Commercial Online Print division out of our figures, and it would be roughly 1 percentage point of margin increase, which we are having here. And also our return on capital employed will increase significantly by 2 percentage points on a pro forma basis in 2025. So this deal gives us focus, give us better profitability as well. And we will have a cash inflow. We will come to the metrics of the deal in a second, but we will have a cash inflow. So we did not sell it for EUR 1. So we will have a cash inflow and how do we use that cash inflow? We want to use it in a value-oriented manner. So the strategic priority, as pointed out in the first point is the photofinishing business. So we want to continue to invest in technology, efficiency, our brands. I mean we are really the brand leader in photofinishing. But as you all know and you have heard from us, and we are confirming that one through selective value-enhancing acquisitions. We are not trying to do acquisitions for the sake of doing acquisitions. We want to do acquisitions that really make sense. So we tend to say deep pockets, shorthand. So we really will focus there as well. And you can expect from us the continuation of our share buyback program and also the dividend payout, and you will come to that in a second, Sirka, we remain one of the very few leaders of constantly increasing dividends here, and this is something you can expect from us as well. So looking a little bit deeper into the transaction. Who are we selling it to? It's the company called Cimpress. Most of you would know it from the brand VistaPrint. If you're German-based, you might have heard of WIRmachenDRUCK.de, which is a website where they basically do the same business like we are doing. And for them, it makes a lot of sense. It really makes a lot of sense because in Germany, they do not own a production yet. So they print at third parties mainly. And I can see -- I mean, at the end of the day, you have to ask them in their quarterly call. But at the end of the day, it makes a lot of sense for them because with the acquisition, they not only gain revenue, but they also gain the capabilities of a very efficient production, and they can use this production to print their own product there. So it makes a lot of sense to them. This is why they take over all the 544 employees that we have in this business division. It will be taken over. And we have to say they're the global market leader. And we have always discussed the topic that this is a consolidating market. And so they will be able to produce more efficiently. And we can also say, well, we are quite proud that what we have built over the last decade -- a little bit more than a decade, actually, it was so attractive that the world market leader actually had a high interest in acquiring this business segment. So looking into the transaction there, this is -- okay, sorry about this one. So first, let's talk about the -- we had a different slide here. Okay. Let's look back a little bit. So we have a bit of confusion, that doesn't really matter. So where we were coming from? If you look back in 2009, so that's a long time back. We know that -- sorry about this one, but it made sense to think about something like Commercial Online Print. What was the situation we were in? We were not able to grow the photofinishing business at that point in time. We had capacity in digital print. That was the start in 2009. And so we wanted to leverage also the brand that we had built for the Commercial Online Print. You all might remember that we tried with CEWEPRINT.de, these were moves we made there. So it seemed appropriate, let's put it that way, to establish Commercial Online Print as a new business unit. So this has changed a little bit. And you know that what we did in the photofinishing, we really grew that business through acquisition organically, through regional expansion. So we really grew that business, and we didn't grow the Commercial Online Print to, let's say, balancing second leg that you would stand on. So what we are in right now is a business with a consumer-oriented photofinishing. We have double-digit margins in the consumer-oriented photofinishing. It's our growth driver, but it's also our margin driver very clearly. And the Commercial Online Print is just clearly a very different business. It's a price-driven segment. It's B2B oriented. We cannot leverage our brand. We cannot leverage our B2C capabilities as much as we hoped for, let's put it that way. And we also were in front of this decision to say, okay, do we invest more into that because scale matters really in the Commercial Online Print. And this is the decision we took. We said, no, we focus on photofinishing. We don't want to dilute this because scaling in Commercial Online Print would have meant a significant investment and it would not have allowed us to significantly invest into photofinishing. So it was really -- it was like a turning point for us, and we took a really strategic decision here. So now -- sorry about this one. Coming to the transaction details. Obviously, we did sign yesterday, but the closing is depending to the typical conditions, mainly antitrust approvals. We expect it to take place during the second half of the year '26. You might ask us, okay, how much did you get at the end? We have agreed not to disclose that price, but we can tell you we managed to sell it for a higher price than our book values. You see that in the last bullet here. We expect to generate a gain from the sale of this business segment in the mid-double-digit million euro range. It's a bit complicated there. But it was -- let's put it this way, quite frankly, it was a good deal. It was really a good deal. So we managed to really get back and a significant portion more than what we had in the books. And we will receive a cash inflow. I refer to that as well. Just for you to remember what was the turnover, it was close to EUR 90 million with an EBITDA of EUR 8.9 million, an EBIT of EUR 1.7 million and EBT of EUR 0.9 million. So that was -- that's basically what we are going to divest. What can you expect in our figures? So now or yesterday, let's put it that way, with the signing, we will separate the Commercial Online Print from our consolidated income statement. IFRS is telling us to do so. We continue to report the segment with the COP segment and group totals with and without Commercial Online Print, you can expect us to do so. We need to do it. We expect closing, as I said, in the second half of '26. Then we will deconsolidate, it's an interesting word, deconsolidate the Commercial Online Print and of course, with the recognition of the gain of disposal. And we will also adjust our segment reporting accordingly. So this is something you can expect for us. Just for you to get a sense of what's happening with the group, and we did this based on of course, the full year and the only full year we are having is the year '25. So we did this on a pro forma -- it's really pro forma display here with the consolidated financial statements from '25. Our turnover, obviously, because we are selling a whole business segment here will decrease to EUR 777.0 million. That's an interesting figure. It's not a Boeing jet here. It would be the turnover figure from last year. The EBIT would decrease slightly as well. Profitability, as mentioned, would go up by 1 percentage point and our ROCE, as mentioned, would go up by 2 percentage points without the Commercial Online Print. Our target ranges, obviously, we had to adjust as well for '26. So the revenue that we project now is between EUR 780 million and EUR 810 million and the EBIT between EUR 85 million and EUR 91 million. This is -- yes, and here, you can see it on a long-term range again. You can see the famous chart. We still call it internally the Olaf chart just in accordance with our old CFO, who invented this chart. So we see the long-term growth path to be continued into '26. And the story remains very intact and very solid and even more compelling without the Commercial Online Print segment. And here, you can see what we have just mentioned, the group EBIT without Commercial Online Print, this is the new target range, EUR 85 million to EUR 91 million. This is something which we will expect for the year 2026. And here, you can see our new targets which is very important. And you can see the Commercial Online Print had nothing to do with the photos and nothing to do with the CEWE PHOTOBOOK there. So you can see the previous year figures on the left-hand side, previous year '25, including Commercial Online Print, the old target, including Commercial Online Print, then the pro forma figures of the year '25 without the Commercial Online Print and the new targets. And we talked about revenue and EBIT already. I just stressed the fact that it doesn't change anything in terms of photos. It doesn't change anything in terms of CEWE PHOTOBOOK. The EBIT effect here, you can see this is very important to know is EUR 85 million to EUR 91 million. The EBT here, and this is without -- and the earnings after tax is without the onetime effect, and we will come to this one which we were expecting from the Commercial Online Print, right? So this is the target without Commercial Online Print, but we have a nice chart which will illustrate what's happening with the earnings after tax and what's happening with the earnings per share. I think this is about to follow, yes. So here, you can see our earnings after tax, the new range, which we are going to expect from the business segments to be continued. So from EUR 58 million to EUR 57 million to EUR 62 million, but we will have an earnings after tax resulting from the sale of the discontinued segment of Commercial Online Print, which is actually quite significant. We are not going to comment in detail on that, but just by the size of the box we were trying to illustrate, you can probably deduct a little bit of what to expect here. And the same is true for the earnings per share, obviously, right? So -- and now let's come to this one, and this is again, just confirming the strategic rationale of this transaction. The strategic positioning of the CEWE Group is 100% focused on photofinishing. We will really entirely focus the whole group on photofinishing with clear objectives. They have not changed by this transaction, not at all, but we will be able to give it more focus and focus means management attention, but means also capital allocation here. So we want to scale across production, logistics and IT, scaling is very important. We discussed that. We have a premium brand strategy. We are quite successful with the premium brand strategy. It allows us to generate a lot higher margin than other, let's say, printers, and we would love to call them printers just to make that difference. We will continue to invest in innovation. We will continue to invest in technology. We will use these investments to automate more, to standardize more and to gain more speed. We think this is a really important USP of our brands here. We will also continue to look at acquisitions like we did before. I mean, basically, all the brands, which you see here, Pixum, WhiteWall and DeinDesign shares have been acquired in the past, I would say, 20 almost 18 years in the past 18 years, and we will continue to do so. We will continue to look for acquisitions which make a lot of sense to us. You know that the segment is not too big. So we have to be very selective here. You know also that we do not have like an M&A department consisting of dozens of people. So we need to make very smart choices on whom to acquire and how to acquire and when to acquire, but you can expect that we are on it. And this should result everything together in the continuation of our growth momentum. And definitely, we will look after our margins. So this being said, these are the news hot off the press from yesterday. I wanted to elaborate a little bit further on this one. And I probably would expect the Q&A session rather is circling around this question here. And you can imagine it's really important. It's probably the most important change in strategy since we started that segment. So let's come to Q1. And you know Q1 is -- it's the first quarter that was a military plane above us. I don't know if you heard that. Sorry about this one. So let's come to the results of the first quarter in a nutshell. And as always, we want to inform you about a couple of developments, which are very important as well. So group turnover grew by 1.4% or EUR 2.4 million. The group EBIT reached EUR 5.6 million as planned. There are a couple of reasons behind that, and Sirka will come to it in more detail. One is a change we made to our DeinDesign division. We went into a slight change of business model. I will explain that on a chart later, which is about EUR 300,000 in the first quarter. And also, we were able to basically swallow and this will be almost the last quarter where we can see this effect in this magnitude our new tariff union contract because actually, we're comparing, let's say, a new cost level here on our personnel cost with a quarter which did not have the same cost level here. So this is why we're saying we are quite in line with what we are seeing here. And this is why we're also saying we are confirming our targets for '26 on the revenue as well as on the EBIT. So in photofinishing, and as always, we are quite proud. Innovation is a key driver in this segment. If we want to continue with our premium brands, we need innovation. We need distinctions to other market players. We need distinction to just the usual PHOTOBOOK and this is something which we are pursuing. You know this product already, but what you don't know is that we received an award for it. That's the Momento pocket. So we see -- we were surprised. I think I commented that already in one of the calls. We were surprised actually by the success of that. It's a very simple product. It's just a pocket at the end of the day in the CEWE PHOTOBOOK where you can put on remembrance like, I don't know, like a menu card from your wedding, for example, or boarding pass from your travel or something like this. Very simple, good margin because it's just something which basically we glue into the CEWE PHOTOBOOK at the end of the CEWE PHOTOBOOK, but does create a lot of value for our consumers, and they love it. We also did receive an award. You always think you can't innovate on the calendar segment, but you can. And this is -- it looks more like a wall art and it's a size, which is astonishing. It's really a wall art. If you put that up to your wall, I would say the calendar kind of goes into the background of the calendar function. It's more the picture there, and it's one of the largest calendars you can order in the market. And very interestingly here, you know that we are pursuing an omnichannel strategy. You know that our retail partners really are at the core of what we are doing. And this -- you see in the background the CEWE PHOTOSTATION, which is usually placed in drug stores or grocery stores and where people go to print. And the question is, how do you transmit your photos, right? And there's the cable very traditional, but it works quite well, right? Sometimes you have to stand in line. I don't know if you've ever managed to look just before Christmas into one of these stores, people really stand in line and they connect their smartphones like their pictures and so on. Some of them, especially when standing in line, have some privacy issues, say, okay, somebody looking over my shoulders. So what we did here is we built an app CEWE Online Direct. We called it 2.0, where you can with a QR code very simply just transmit your photos to the CEWE Photo station. So very easily, you can prepare everything while sitting in the bus or standing somewhere else and so on. And it does allow us, and that's also very important. It does allow us also to get access to the apps of our retail partners. You know that the dm app, just dm is a large German drugstore chain is very, very popular, millions of downloads used by millions of people because their customer loyalty program is based on that one even payment functions are built in there. And so we can basically put a photo function into their app, very smart, very nice. So -- and also, this seems to be like an IT kind of thing here, like Shopify app connection sounds very IT-ish. It is, but it's -- and what it does, it's not. You know -- we know that marketing of product has changed a lot over time. You see that in the music industry, for example, where you can see artists that don't use a label anymore, and they use platform like YouTube, for example, or just Instagram or TikTok to become famous. And the same is true for photographers. So in former times, photographers, if you're a professional photographer and wanted to sell your photos, you needed a gallery, right? Gallery really to -- at the end of the day, as an intermediate to sell your pictures. A lot of photographers don't use a gallery anymore. They market their pictures via Instagram. They have an own web shop in order to sell their pictures. But what do you sell? NFT really did not come through that much. So you actually sell printed pictures, right, printed photos. And how do you do that as a photographer? What are you doing? Are you ordering that at, let's say, WhiteWall or CEWE and you put it into your garage. And if somebody calls you up and then you send it out to the U.S. to Japan, to Europe, how do you handle logistics? How do you handle customs and all of that? And that's something we can do. So what we built is an app that can integrate in Shopify. Shopify is one of the most used technology platform for photographers to build their web shops with. And it just plugs in and they can define, okay, I have this picture. I have an addition of 10 or 50 or 100. I want to have -- sell it in this size. I want to sell it with this frame and we handle the rest. So we handle logistics. We print it on demand. There's no risk for them and so on and so on. It's branded. It's quite neat, and we see a lot of future for this one in our relationship with our photographers. So -- and yes, I did not mention that we got a award for it, but we got a for it as we did for all the others. And last but certainly not least, and I commented on that one because it's a little bit the reason for not reaching the previous year EBIT figures here because we did invest a little bit into the change of DeinDesign. DeinDesign is our specialist for smartphone cases, and you see them here. And in the past, we concentrated on the value of the photo on a case, right? It sounds logical to you, right, or a design on a case or something like this. And we saw the market changing quite significantly, and we saw that the value is not only by the case -- by the picture on the case, but also by the case itself. And this is a little bit different to what you see maybe on paper, like if we print something on a paper and we create a CEWE PHOTOBOOK from it, then the paper already gets a totally different value. And this is not so much the case for smartphone cases because the primary target is you want a smartphone case to protect your smartphone. So we said, well, the quality of what we had in smartphone cases was good. It was not outstanding. So people said, okay, it's nice that I can print a Disney design on it or that I can print a photo on it. That is quite good. But the smartphone case you're using for it, I can actually get for EUR 7 at Amazon or EUR 5 at Shein and so on. So we said we need an own range of cases, which are really outstanding, which at the end of the day, support our premiumness of our brand strategy here. And you can see that range. And we also, in addition to sell that printed with a photo, we also say, okay, this is a good range we can also sell with our picture. And this is an investment we did. This is why we needed a different name. So it's NIVOCASE by DeinDesign. I invite you all to go to this website, look at it, really great product. We don't have a smartphone here, but I can assure you, very, very, very nice and premium product together with the nice picture. And this was my elaboration of what had happened in the past months, and I hand over to Sirka to let her tell what that meant in figures.

Thank you very much, Thomas. So yes, let's get back to numbers. So let's start again with the photofinishing, which is our core of the business. So if you look into what happened with our turnover, you can see that there is a moderate growth. So the moderate growth means here, we have a turnover increase by 1.7% I mean, if we anticipate what's going on in the different economies, I guess, even for first quarter, we can be quite satisfied with it and especially also because we, again, follow the trend that we have a volume growth. And so this is always good. And we will also later see what products drive this development. If we look into the EBIT, you can see that -- and Thomas mentioned it already, that the EBIT mainly contributed from the photofinishing here for the group EBIT. So EUR 5.1 million coming out of the photofinishing, which is compared to the last year's first quarter, EUR 0.5 million less. And this is by EUR 300,000 driven by the adjustments into the business model of DeinDesign. So we redeveloped the web shop we invested. And of course, the business, while this transition is happening. We've seen, of course, less turnover, less results, of course, and this is also our investment into the new business model of the DeinDesign, the NIVOCASE as core product, and we will monitor and watch the developments in the next months quite closely. And also, we have one of our Board members acting also as a Managing Director for that business. So we are very close watching the developments here. So all in all, we would say a successful start to the year, but we also see a continuous increase of our cost basis, personnel costs plus marketing costs, especially also to support our turnover in the international markets. And so this is here reflected in the EBIT. If we would extract the special effect of DeinDesign, we would see a comparable situation compared to last year. So if we have a specific view on the turnover development of the quarters, you can see that traditionally, the first quarter is the second or nearly the third best of the year. So we are still having a bit of flow of the last season. And so we can see that we ended up within the range -- within our expectation for the first quarter. And also in terms of EBIT, we are in the expected range of the quarter. So if we look into the number of prints, I mentioned it earlier. So there is a good development of the total prints in millions. So continuing growth and also the value per photo is growing, and that's ending up in a turnover of the photofinishing, which is positive. Our core product, the PHOTOBOOK. We can see that the volume continues to grow in the first quarter by 2.2% and also due to a lot of new features, a lot of new product addings like the pocket at the back or the other premiumization options like different paper quality, different covers. So this is feeding again also the turnover of our core product. And please have a look. It's really great also with the new coffee and also the new colors of the covers, it's really great. So Commercial Online Printing. So we start repeating a bit what is containing to our Commercial Online Print segment. It's set up with 3 brands. So we have the Viaprinto, SAXOPRINT, and LASERLINE. So it's still on board, of course, so that we are also having a look into the performance, which is not too bad. So especially if you anticipate the market development. The market is still under pressure. So we have a high competitive environment. And also, of course, it's like if you have a commodity product, it's following also the trend here that the price is the driver. And so this is what you can see here also in the results slightly shrinking. But turnover-wise, not too bad, especially if you see how the market is developing. So the retail segment is also -- I'm repeating a bit what we also presented last time. So we have 101 stationery photo retail stores, especially in Scandinavia and Central Eastern Europe, e-commerce web shops which sell hardware like cameras and accessories and photo products like frames and stuff like that, decorating the photos integrating into the rooms at home. And so what we can see here is a slightly decrease of the overall turnover by 3.7%, but the EBIT is slightly rising. I mean it's all in all, a low contribution with small amounts. But also we can see that the hardware retail, which is really related to these hardware products is growing. And so the trend is obviously not really shrinking. So the other segment is not really adding something to our business, but it's part of the reporting. And so I have nothing to add on that. So that leads me to the financial details. And it's here in the consolidated P&L statement for the first quarter. So we have an addition of EUR 2.5 million -- nearly EUR 2.5 million more revenues mainly driven or contributed by the photofinishing. As I also mentioned, the result is affected by higher marketing expenses, higher shipping and logistic costs and higher IT license costs. But also what we can see is that the expenses for the materials are rising. So it's a mixture of different effects. So that means that our EBIT is lower than the last quarter in '25. If we look into the balance sheet, you can see and you probably have noticed that the balance sheet is growing. So we have now an equity ratio of 70.8%, which is quite high. And this is mainly because we invested into 2 buildings, and we added a renovation of our local facility here. So we invested into a production place of our WhiteWall business in Frechen, but also we bought a new building in the U.K. and which are our last 2 bigger investments into our production facilities. And so this is, of course, increasing our asset base, but also we invested into photo paper mostly into the photo paper photofinishing business, but also for -- still for the Commercial Online Printing. And -- if you look into our free cash flow, then you can see here, of course, what happened with our investments. So you can see here, especially the cash flow shrinking from the investment activities by EUR 25 million. And so also the operational cash flow -- the free cash flow, sorry, is shrinking. If you look into the operating activities, this is more driven from an offset of the working capital. But the significant changes towards the last quarter of '25 is really the investment activity. So -- and this is really the investment into the production plants. And so that also means for us that all our production plans are now in our hands. And so this is it for the moment. And so we follow our strategy to be the driver of what we are doing with the properties. And -- but this does not mean that we invest into further property production plans because we have now all in our hands. So the return on capital employed also here is reflecting the result situation, 17.4%, still strong. And the dilution, which was here by the Commercial Online Printing is going away by selling the business. The seventh (sic) [ 17th ] time in a row, we proposed to the Supervisory Board, Board of Trustees, but also for the next step for the shareholders meeting, we proposed EUR 3, which is, again, EUR 0.15 higher than last year and anticipates also a bit the -- or reflecting a bit the last result situation of the year '25. And so we will -- we are curious for the shareholders' meeting taking place beginning of June to get an approval. And we would like to follow our, I would say, also reputation as being the top dividend increaser at index or stock exchange here with the second place. So for us, it's not only driving so the numbers, it's what makes us happy, it's our customers. And so happy customers is our key and core element of managing and driving the company. Thank you very much.