Frequentis AG (FQT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome, and thank you for joining the Frequentis Financial Year 2019 Conference Call. [Operator Instructions] I would now like to turn the conference over to Stefan Marin.

Ladies and gentlemen, good afternoon, and welcome to our financial year 2019 conference call. With me are Norbert Haslacher, our CEO; Sylvia Bardach, our CFO; Hermann Mattanovich, our CTO, COO; and Peter Skerlan, Vice President, Finance. As usual, we'll start with the presentation followed by Q&A session, and I would like to ask Norbert Haslacher to start.

Yes, thank you, Stefan, and also a warm welcome from me as well. As we are in extraordinary times, we want to start with the topic that is predominant, which is COVID-19. So I would like to start on Slide #3, how do we actively manage COVID-19 challenges. We, as a group, are convinced that we do the best to actively manage the COVID-19 challenges and to keep the wheels turning. Besides the most important topic, the protection of health and safety of our staff and their families, we took decisive steps to continue our business. So dedicated crisis teams, in total 5, at management level have been activated already end of February to manage the whole group through this phase. And furthermore, we set measures to mitigate different workloads. The good thing is that Frequentis is a very global company and always was, so the people are used to work from mobile offices or home offices. Good thing is that the IT is working from day 1. To give an example, we yesterday had 1,200 VPN connections to our network and parallel 260 video calls with our clients, and the network was only utilized by 70%. So I think that's a good sign that the IT infrastructure is working very well. On Slide #4, I want to make some comments around how we manage our business within the current framework. So the current travel restrictions, of course, are a burden. Even if we are confirmed as an infrastructure critical company, we are, in some cases, allowed to travel. Even with the restrictions in place, we were able to do acceptance tests for our solutions in Europe. One additional advantage is that we have a lot of companies decentralized in countries like the U.S. or Germany or other countries where the delivery chain is decentralized from Vienna and are able to deliver on-site within the respective countries. Our staff is doing the utmost to enable digital execution of project milestones together with the customers, so they are also interested to keep on going and move the projects forward as they are also working from home. It works quite well, but, of course, with tailor-made solutions in place every single day. Regarding the supply chain, we can report that our proprietary production of hardware at the Vienna headquarters is not affected at all. We always -- due to the obsolescence management we have in place since decades, we always purchased lifetime demands into our stock, that helps us now that we are able to deliver and produce the proprietary hardware elements for our solutions in Vienna. We may have some challenges regarding the standard commercial-off-the-shelf IT infrastructure; hardware, monitors, routers. But we monitor that with a lot of suppliers continuously day by day to make sure that we get appropriate hardware support from those suppliers. Besides the fact that the order intake was up in Q1 2020 compared to Q1 2019, and we're continuously getting orders from all over the world, it's hard to judge if customers postpone new projects and investments as the restrictions continue to be in place. So that's the risk we probably have that these investments could be shifted. Let me now go into the financial performance, and I wanted to mention before I go into the detail, one thing, I think we can prove now again that we deliver our promises as we are proud to present a very good 2019 result. And I think it's now time to thank the whole Frequentis team that they have delivered such a good performance in 2019. So when you look on Slide #6, the '19 result is in line with our long-term growth path. I can report more than 6% organic revenue growth. We managed also to increase profitability on the back of some higher-margin orders, and the EBIT grew by more than 10%, so the margin increased to 5.7%. The order intake increased significantly, so we managed to bring in EUR 334 million additional orders in 2019, so the growth compared to 2018 was 9%. And what's really a good message for us as a company is that we took nearly EUR 400 million orders on hand into the new fiscal year 2020. These orders on hand secure around 70% of revenue in 2020 already 1st of January and, of course, depending on the further development of COVID-19 and executing the milestones. We are still net cash positive. And considering the proceeds of the IPO, equity exceeded EUR 110 million. Considering the uncertainties caused by COVID-19 pandemic, in accordance with the principle of commercial prudence, we proposed a moderate dividend of EUR 0.15 per share. We will recommend in the Annual General Meeting, which is still planned for the 14th of May this year, the postponement of payments into autumn 2020 depending on liquidity situation of the company, course of business in the coming months, but especially, depending on the upcoming potential legal framework and government recommendation, which are unclear now. A press conference from the Austrian government with regards to dividends is to be held tomorrow. And I think tomorrow, we will hear what the government is telling the companies when it comes to dividend payments. Motions for the Annual General Meeting to be published as planned on the 23rd of April, the latest. I would also like to give you a little bit more insight around the orders we have secured for the company in 2019. So the global sales team generated new orders worth EUR 334 million in 2019. 60% of orders were received in the second half year. So I think that's a phasing we have experienced already the last years that we do around 40%, 42% of orders in the first half year and the rest in the second half year. The split between the 2 segments that you can see in the chart is, of course, influenced by regulatory requirements and the budgetary cycles of governments and various governmental agencies. They are, by far, our main customer groups, as you know. So the fact that we can manage the different order intake splits shows the resilience of our business model, providing solutions for safety critical governmental entities worldwide. On Slide #8, you see also the revenue growth path and the orders on hand, the development. So regarding revenue growth, we were able to increase revenue at both segments. The revenue split was unchanged. So always between 65%, 70% ATM, civil and military, and around 30%, 35% Public Safety & Transport. For more details of our financial performance, I will now hand over to our CFO, Sylvia. Please.

Good afternoon from my side as well. On Slide 9, you have a look on our profitability. We were able to increase EBITDA and EBIT even after adjusting for the positive impact of IFRS 16. This development was possible by some projects with higher margins. The positive impact of the initial application of IFRS 16 was EUR 7.5 million on EBITDA and EUR 0.4 million on EBIT. We were also able to improve our margin situation. The EBIT margin improved from 5.5% in 2018 to 5.7% for 2019. Net profit increased by 4.9% to EUR 11.8 million. Given the higher average number of shares due to the IPO, earnings per share was EUR 0.93 in 2019. On the next Slide 10, let me explain briefly the basic financial policies of Frequentis. We want to maintain a net cash position to be able to finance organic growth and acquisition opportunities efficiently. We are currently at a rate of about 25% of net cash to revenues. Maintaining a net cash position is very important for our customers who like to see healthy and stable balance sheet. We had net cash of almost EUR 78 million. There was about 40% advanced payments. Equity ratio should stay at least at 35%. This is an important parameter for our customers to show that we have the financial strength to execute their orders. As of end of 2019, the equity ratio was 42.7%. CapEx is mainly maintenance CapEx for IT, software licenses and IT equipment, and for equipment for production sites and buildings. We expect to keep it about EUR 5 million a year. R&D expenses should stay at the level of about EUR 22 million in 2019. As Norbert Haslacher already mentioned and considering the uncertainties by COVID-19, we suggest a dividend of EUR 0.15. Our dividend policy remains unchanged. I shall now hand over to Hermann Mattanovich, who will give you an insight in R&D.

Hello. Good afternoon. If you change to Slide 11 and have a look to R&D in 2019. Research and development is a core process within Frequentis, and it remains the basis for our growth and our success story. R&D not just includes new development, but product enhancements, development work for customer projects, and life cycle and product management as well. A good part of our R&D is paid for by customers. Mostly, this takes place in the second half of the year in accordance with the seasonal nature of our order intake. It is important to note that we don't capitalize R&D expenses. So they are fully expensed. Internal R&D expenses expressed as a percentage of revenues were a little bit more than 7%. I shall now hand back to Norbert, who will finalize the presentation.

Yes. Thank you, Sylvia. And thank you, Hermann. I would like to guide you through Slide #13 to give you a little bit of an outlook. I think you all have already identified that we have been successfully conducted an M&A transaction recently. We purchased 51% of ATRiCS, which is a German family company. And we are very happy that we were able to acquire this company, which offers innovative software solutions to improve safety and increase capacities at airports. This is exactly -- if you remember our IPO story, it's very consistent that we have been looking for companies, especially family companies, having a good product, but couldn't manage the globalization of their go-to-market. And ATRiCS is exactly a company which is specialized in the ANSP and air traffic business, which will enhance our digital tower automation strategy and vision as a good product, which is already established in Germany and in some countries in the Middle East, and will now be taken into the global sales channels of Frequentis with our customers in 140 countries in the world to combine products with Frequentis together and address the tower automation ongoing investments on the ANSP side worldwide. As a reminder, our acquisition policy was always stating that we buy companies with a maximum revenue level of about 10% of group revenues. And I think this company is at the lowest end with EUR 4 million revenue annually and around 30 people, but from a culture perspective and from a technological perspective, it's a very good fit, and we welcome ATRiCS to the Frequentis family. On Slide #14, so the high level of orders on hand, which we are really proud of, secures around 70% of revenue in 2020 already by January, of course, depending, as I've mentioned already, on the further development of COVID-19 and the travel restrictions to be able to deliver milestones on-site where necessary. We also strive still to increase revenues and order intake in fiscal '20 based on a very positive start in 2020. However, the impact of COVID-19, as already outlined, will make this aim, for an increase, a continuous challenge we will monitor daily. We are convinced that we are on the right track in making existing technology also usable for our customers and R&D plays an important role in achieving this goal. Last slide, let me conclude, please, with one slide, giving you a short overview of our employee participation program, which we have announced a couple of weeks ago. So after the full outbreak of COVID-19 in Europe with all its limitations, we decided to ask our people directly in Austria and Germany, which are applicable for this program, if it's now the right time, from their perspective, to continue the program or to stop it. We wanted to have the feedback of the people from Frequentis. And the response, we have to say, was overwhelming with more than 70% of the employees supporting the program. So the program is designed as a capital increase. Hence, we'll get some fresh money from our employees. And we are really proud that the employees motivated us to continue that program. And 3rd of April, tomorrow, the program will start, so we make the employees also to shareholders from Frequentis. We are -- I'm at the end of the presentation, and we are now happy to take your questions. So Stefan, please?

Yes, I would like to hand over to the operator.

[Operator Instructions] The first question comes from the line of Adrian Pehl with Commerzbank AG.

I've got 5, I think. First of all, on your guidance. Just to be clear how that is actually meant. So I assume that the guidance you've provided is already incorporating some effects of COVID-19 we might see this year? Or is that actually meant to be a guidance before COVID-19? So anything in terms of clarification on what the underlying scenario is would be helpful. And again, on that very topic, COVID-19, thanks for your explanation on the supply chain side. So I was just wondering on the final acceptances that are out there on other projects. How is the situation actually? So obviously, there's -- traveling is not taking place. I think, however, you have obviously to be present to have the final acceptance done, assuming a quick recovery from COVID-19, you might not be affected at all, but potentially that might shift to the right. So anything you could clarify here would be helpful as well. And thirdly, on your strong margin that you had in Public Safety & Transport, I mean, obviously, this was like copying the good performance of the first half. Is that actually still, nevertheless, some kind of onetime strong EBIT margin? Or is that the level you think is sustainable going forward? And fourthly, actually, on the R&D. You mentioned that's going to stay on the same ballpark level as in 2019. So assuming your guidance will become reality, I mean, you should be capable of posting a better margin. However, there is probably some kind of swing factor if that does not take place. So any thoughts on operating leverage and potential cost-cutting on COVID-19 effects would be helpful as well. And lastly, on mergers and acquisition. I mean, obviously, there could be some opportunities out there. And given that prices are coming down, I recall from our road show some time ago that you said you were actually close to acquiring a target. However, then finally, there was no agreement on pricing. I mean is there still an attractive shortlist that you're looking on and trying to pursue some targets? Or have you shifted M&A plans as well to some degree on COVID-19?

Adrian, Norbert speaking. Thank you for your questions. Before I start answering the questions, can you give us a little bit more background, what you exactly mean by guidance?

Yes, because you were saying, I mean -- by the way, congrats for the strong order intake. So it was really surprisingly strong. But I think you're saying that you strive for increasing order intake in 2020 and also the top line. So the question mark behind it is, is that, let's say, your original plan you wanted to communicate, but there's higher risk on COVID-19? Or is that already factoring in some effect from the corona crisis?

All right, now I got it. Thank you. Yes, concerning the order intake, what we have experienced, Adrian, in Q1 is that we had an extraordinary strong Q1 2020 already. So compared to 2019 Q1, 2020 Q1 was much better, and we continuously getting orders from different segments and different parts of the world. Of course, we cannot predict how long this crisis will take and if there are postponements or shifts of budgets in all the countries in the world. But for now, we see in the order intake, a good Q1, and we hope that this can somehow continue, keeping in mind that the situation is changing every single day. So what we presented to you today is already including the COVID-19 effects. Your second question, Adrian, was around [ FAT ] and final acceptance. We have to differentiate between the different countries. So as you know, we have heavily invested until last years in building up local delivery chains in a lot of countries, especially in the main countries like Germany, Australia, U.S., Canada, U.K. Northern Asia, that these are very independent from Vienna conducting their projects and their project services. In other countries, we are in close contact with our client on video and audio calls to even conduct [ FATs ] virtually. So clients also want to close the programs, and they are very flexible in using digital technology to bring the projects further. Of course, in some countries, that won't be possible, but for now, the whole Frequentis team is still fully utilized in executing our order intake and our projects. This can change in the next weeks, but for now, we see a full utilization of our staff in all the countries. Concerning your third question, public safety, we are very happy about a lot of contracts. We also have published recently the big contract we got from metropolitan police in the U.K. And this is showing our LifeX, as you know, the new software we have developed last years, as a baseline for this type of programs. That's why the margin -- the contracted margin on these deals is higher due to the software license share in this business. And we still hope, especially in the public safety area where control centers for blue light organizations are concerned, we probably can expect, which is not confirmed now, but we think that critical infrastructure governmental entities, of course, have to provide critical infrastructure services, especially in this area as early responders, first responders, in fire brigades, rescue centers and police have to be up and running, especially in these times. So we hope that we can continue the successful public safety development of last year. Concerning R&D, we use also the time now and a lot of ANSPs and public sector -- public safety entities ask us, don't -- can't we somehow create a think tank together? What kind of new technologies maybe driven by pandemic learning could help us in finding new solutions for our industry? Some of them say they now have, due to the pandemic, a lot of utilization freed up to be able to discuss with us new technologies we could probably develop together with them into cloud services, into drone management, into more usage of remote tower due to pandemic learnings. And we think that the R&D will continue like it was last year. And your last question, Adrian, and I hope then I have covered all of your questions, was M&A. I always said, also in the investor conference in Frankfurt, that we are close to an acquisition, which has been announced recently. It was ATRiCS. Nevertheless, we still have M&A targets ongoing. And as I've stated today morning in the press conference, maybe also driven to this situation, I got a lot of activity from other companies, who are getting in touch with us in Europe, learning if there is a win-win situation between Frequentis and them driving future development and future technology demands of our clients, especially in the area of public safety. So M&A strategy is ongoing. M&A will go on. You know that we have an M&A strategy. This is unchanged. And there are opportunities out there we are following up. Concerning cost-cutting with COVID-19. If necessary, we will do that. But as I've said, we are fully utilized for our order intake programs and EBIT steering, no plans right now, but this can change due to the next week's development. I hope I answered all your questions, Adrian.

Yes, it was pretty comprehensive. So many thanks for that. Just 1 follow-up question that was -- what I was banking on a platform now playing out in your favor in terms of margin. So 2 questions. First of all, should we assume that any LifeX project that you realize is potentially higher margin? And second question, I recall that actually a similar platform development has been ongoing for the ATM division. And how are your proceedings here? Is that finished now? Are you going to bring it to the market? Or how should we think of it?

Yes. So as you know, we are requirement driven based on the tender procedures, which are mandatory for our clients. So the better the tender is addressing the standard capability of LifeX, the better the margin is. So I think, the tricky thing is to convince the client to tender a solution which is close to a standard product, which is deliverable by our software factory. The higher the individual demand of the tender is, of course, the lower the margin is because we have to develop the gap between the standard product and the requirements of the tender. But I think metropolitan police showed us that the client is really interested in going at more commercial paths, being part of a bigger group, following together a release train. But this is an educational exercise we have to conduct together with our clients. But we see the first successes that clients start engaging in release train discussions and how LifeX is evolving compared to other clients in the market. Concerning VCS development out of the cloud for air traffic management, we are proud that we have released the first release for the tower solutions. So there, we have already a tower solution ready for sale for smaller towers, up to 5, 6 working positions. This is always a good start to make a test if this solution is provided out of a data center in a virtual environment capable to address regulatory requirements of an ANSB. We have released that around 2 months ago. So that's the first release 1.0. When we address the big centers having 200 and more working position in a virtual environment, I think this will take some more time as the complexity is raising exponentially, but we are already with release #1 on the market for tower with voice communication system for ANSBs out of the cloud.

The next question comes from the line of Roger Becker with BankM AG.

I have a question regarding the margin situation. How do you classify a potential threat regarding margin compression in the future? For what I'm thinking about is your competitors also might lose part of their businesses, and so they might act more aggressively in tenders so that there will be or might be an overall tendency that the margins go down. Related to this question is the ATM segment, when now the traffic control has less to do, so the air traffic has dramatically decreased. So is there a -- is it possible that they approach you and say, okay, our business has gone down and potentially will continue to do so. Can we reduce the cost on our side, so -- which will have an impact on the ATM margins. So that was the margin complex. And just to check if I understood you correctly regarding the PST segment. Is there -- can we anticipate an increase in revenue in the PST segment, especially with regard now to the COVID-19 situation and the blue light agencies? You answered already this question a few minutes ago and said that, if I understood correctly, that this might have a positive effect. I think we all wish that there will be no effect and that COVID-19 goes away. But nevertheless, might this have an impact on your top line results?

Yes. Thank you, Roger, for your questions. I would like to refer to the first question, which was a combination of questions around the buying behavior and maybe offering behavior of competitors. I think the situation, Roger, is unchanged compared to what I told you a year ago that you have to keep in mind that we have to answer a tender. And the tender has to be [ ANZ ] compliant. And the tender methodology, how to award a contract, could be based on price points, quality points, reference points and other points. So it depends on how the client structures the pattern for a contract award. What we see is that our clients have learned from the past that price is not always the best way to success. So they start now to maybe overweight a little bit more quality delivery services, references than price. It's not a general rule, I would say, but I say when I see the tenders, and we answer around 2,000 a year, that the client in the public sector try more and more to get the solution which is quality driven and which is able to deliver than being the cheapest. Therefore, a competitor being the cheapest will probably not lead to an award due to the pattern and methodology how they evaluate the weight of the price points versus quality points and reference points. That's one thing. That an ANSP is asking us during a project to cut down costs is probably a very unrealistic scenario. As you know, our clients are 95% governmental entities. And there it's more the question on how can we deliver the project as planned and not how can we cut the costs during a program as they are not commercially driven, even though the ANSPs may be faced now a loss of income due to the reduction of air traffic. But you always have to keep in mind, they are a provider of safety critical infrastructure. So it doesn't matter if 100 aircraft or 10,000 aircraft fly over their air space. They have to provide safety regardless of how many aircraft are in the air. Therefore, we do not expect an additional price discussion with the clients during project execution. Your second question, Roger, around PST. We see a demand of discussion from our blue light organizational clients asking us if they could adopt drone operations into their current environment as they have a demand driven by Asia. They deliver insulin medication to remote locations via drones. They use drones to identify masses of people, although there is a restriction from the government. So they see a benefit in using drone as an air space element to help them identifying breaching regulations of COVID-19 regulations. So we see a demand. Thanks, God, we have already invested in this technology 2 years ago. And I think also the regulator now is speeding up to allow drones flying in the air space to help the blue light organizations to maybe better fulfill the execution of the regulation. You were asking if we see revenue growth in 2020 on the public sector, public safety, blue light side. I would say, yes, but always keeping in mind that we cannot predict the future. So for now, we see an increased activity from blue light organizations talking to us. We also -- if we have a scenario that we can deliver all milestones as planned do see a growth in the public safety area, but always under the condition that COVID-19 is not giving us a bigger impact than currently expected.

The next question comes from the line of Daniel Großjohann with BankM AG.

My question is around, can you give us a flavor on your ability to deliver projects under current circumstances? Perhaps, you can handle some projects digital or by local employees or with your own employees, but there are a share of projects that are postponed now or stopped, I think. Can you give us some details about that? And what revenue impact has that if we are under current situation and no further progress?

Yes. As I said in the beginning, what is a driver for the performance of fiscal '20 is the current travel restrictions. So at the moment, the governmental entities give us the feeling that this is an exercise which probably will last for the next 6 weeks. So if we are ready and able to travel from May, June on, I think the impact will be limited. If the travel restriction will last until autumn or even until the end of the year, then, of course, we cannot count it, but we are working on calculating scenarios what that would mean for our P&L. I see the client side is very flexible now to accept [ FAT ] and digital exercises easily. But you're right, at some point in time, there is probably mandatory necessity to be on site. In countries where we have our local staff, this is not a problem. So in the big markets like Germany, Australia or U.S., we have, as you know, our local people. But in some countries, probably that could be a problem if the travel restriction is ongoing till the end of the year.

[Operator Instructions] The next question comes from the line of Alex Nieberding with Conduction Capital Advisers.

Yes, I have a question regarding EBIT margins and a question regarding accounts receivable. On EBIT margins in 2019, you saw a mild decrease in ATM and a significant increase in PST. Could you comment briefly on to what extent the levels are sustainable going forward? And what you may expect in the midterm on those?

Alex, you wanted to ask -- your second question is about accounts receivables?

My -- the question on account receivable is, in 2019, the accounts receivable increase was nearly as much as sales in absolute terms. In accounts receivable days on hand, it was an increase of about 13 days or 23%. I was just wondering if you could comment on that increase in accounts receivable because obviously it's consuming cash.

All right, so the EBIT margin, as I said before, I think we did a good job in offering more precise offers, which are closer to our standard product line, so that gave us a better contracted margin upfront. In the project execution, I think we also, as you know, optimized our delivery model with some nearshore and offshore capabilities we have built up the last 2 years. So I think they are major drivers for improving and increasing our EBIT margin. We don't see, at the moment, any major impact on that as the business model is very diversified and decentralized. But of course, as I said before, if we're not able to finalize the programs where necessary due to travel restriction, this could have an impact on the bottom line as well. But the increase are predominantly driven by a better fit to our standard product lines and to our delivery model we have enhanced in nearshore and offshore capabilities. Concerning the account receivables, I would like to ask Peter to answer the question. Peter, please?

Yes. Thanks for the question concerning the accounts receivables. That's due to the fact that we do a lot of business in the last quarter. And we finished the milestones in raising invoices to the customer than in the last quarter. And then it's very often in the hand of the customer if he pays for the invoice in 2019 or he pays it in the next year. That depends on if he wants to -- if he has the funds available in 1 year or he prefers to pay it in the next year. And we had 3 bigger project milestones with invoices where, unfortunately, the customer decided to pay it in the first quarter. In the meantime, the invoices are paid. But yes, 1 week makes a difference.

Okay. A follow-up to each of those, if I may. In the annual report, it says that about EUR 3 million is now 90 to 180 days overdue. And about EUR 800,000 is over 210 days overdue. Is that something a concern to you? Have you had much of a loss experience?

If you refer to the impairment concerning accounts receivables regarding to the opening invoices, you will see that not a lot of invoices face a loss then. So most of our invoices are paid at the end of day by the customer. Sometimes, due to internal processes with the public authorities, it takes a little bit longer. But at the end of the day, almost all of the invoices are paid.

All right. And just a very quick follow-up to the EBIT margin question. It makes a lot of sense what you're saying that you're more precise in your offers going in. It's closer to the standard product. But that -- I think you were probably referring mainly to PST, where you saw a very strong increase in your margins. What about ATM, where you saw a decrease in the margin?

In the ATM sector, which is a combination of 4 entities, 1 is the Vienna ATM Civil with our voice communication system network and tower automation business plus our Comsoft business in Germany plus the defense business plus the AIM business, we had some project topics in AIM. We started a restructuring program in the AIM sector, which is around EUR 20 million business, and that impacted the EBIT margin a bit in 2019. AIM is aeronautical information management database business.

[Operator Instructions] The next question comes from the line of Teresa Schinwald from Raiffeisen CENTROBANK.

Most of my questions have been extensively answered, but let me come back to one thing in -- at the start of the presentation, and this is the supply chain. You mentioned potential difficulties to obtain hardware. Could you elaborate a bit on that? And also, the impact on working capital, inventories. What's your -- I know visibility is low, but short-term expectations?

Yes, thanks, Teresa. Yes, as I said before, we have 2 views. One is our proprietary hardware production, where we provide our own hardware as part of the solution for the client. So this hardware production is not affected at all. As we -- due to the obsolescence management of our hardware production, we always bought lifetime supply into our stock and we can use that now. There is no delay and no shortage at all for this proprietary hardware production. When it comes to shortages, and to be honest, that's not very much driven by COVID-19 only. We always had in the past already longer delivery times for commercial-off-the-shelf servers and IT equipment like routers from Cisco, Juniper or others. We faced around 4 weeks ago that due to the Chinese situation go down in delivery time. But I've heard yesterday that China is coming up again and productions are again in the direction of running fully utilized. Therefore, hopefully, the delivery time for standard servers will be shorter again soon. Currently, we are at a rate at 13 weeks delivery for an HP or Fujitsu or whatever server. And this is only affecting projects where we are obliged to deliver this cost hardware as part of the solution, which is maybe 10% of our product -- of our projects.

At this time, there are no further questions. I hand back to Stefan Marin for closing comments.

Yes. Thank you for taking part in today's call. We will report the half year results 2020 on the 18th of August, and we hope that circumstances will be better by then for all of us. Therefore, we would like to -- we will look forward to staying in contact with you, especially by calls for the time being as much as we would like to go on road show. So please don't hesitate to drop me a line to arrange for a call. Goodbye, and stay safe.

Thank you. Goodbye.

Thank you.

Bye-bye. Bye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.