GFT Technologies SE (GFT) Earnings Call Transcript & Summary

Thank you very much. Good morning, ladies and gentlemen. Thank you all for attending our call for the preliminary numbers for 2020. The agenda today is like this, I'll shortly summarize the results of 2020. And then Jochen Ruetz, our CFO, will go into the details as usual. And then at the end, I'll share with you our outlook for 2021. So please go to Slide #3. And I think it goes without saying that 2020 was without any doubt, a truly eventful year in which we, GFT, swiftly and successfully adapted to changing circumstances. And the fact that we were able to exceed our revenue guidance, which we gave in June last year, this demonstrates the strength of our business model and our strategy. And in terms of earnings, we are even well above target. Again, the target we set in June last year, and we expect further strong growth in 2021, but I'll come to that at the end of the presentation. I do think it is remarkable that we achieved strong growth in our relatively young business with insurance clients, but also with the cutting-edge, fast-growing technologies. And just to give some highlights, our insurance business grew by 23%; our business with fast-growing technologies by 44%; and thereof, our cloud business grew with outstanding 86%. And in all those cases, these growth rates are double the usual growth rate in the specific markets. And all this together enabled us to grow 14% in revenues, excluding top-2, 4% full top line, including everything. We also, last year, have expanded to APAC, and whilst it's still small, but just to share with you, we have already around 100 people who are now supporting this new region. So we also made considerable progress in APAC. As a result, we reduced our client concentration risk, and the share of our largest client, Deutsche Bank, is now down to 21%. It was the plan. And clearly, this was only possible because of the strong partnerships we have, especially with the hyperscalers, but it's also a result of our ongoing investments in sales and in upskilling our people. We also have completed the integration of the newly-acquired IoT platform sphinx open online, and we do expect growth in the industrial sector in 2021. 2020, as several times shared already in these calls, was behind plan due to COVID. And -- but in Q4, it picked up, and we already had some good, prestigious client wins and Q4 in the industrial sector, by the way, interestingly, in the U.S. And last but not least, we continue to be financially very stable. Hence, we will propose paying a dividend of EUR 0.20, unchanged to the year before. And although this is an analyst call and we mainly talk numbers, I do want to give you a feel how creative our people were to master the pandemic limitations. And Slide 4 gives you an impression. Beside local support, like providing company car to hospital in Poland, other employees created coding workshops for kids, GFT Radio channel was created in the U.K. and now to speak about the various fit for home office exercises or cooking recipes, given most restaurants are closed worldwide. And whilst you might wonder whether this has to do anything with numbers, well, since March 16, 100% of GFT is in home office, and it hasn't changed since. Our people were able to convince our clients that they can trust that our productivity would not suffer although we work from home. Our sales guys switched to selling from home, and we even opened a new delivery center in Vietnam despite COVID-19 limitations. This obviously was all due because our people supported each other, stayed very committed and we delivered 100% as before COVID-19. I'm immensely proud of the resilience, the creativity and the commitment the GFT team has demonstrated. And despite COVID-19 headwinds, we accelerated our own transformation towards a more diversified company with a strong focus on fast-growing tech markets. But Jochen Ruetz will now guide you through our preliminary numbers for 2020. Jochen, your turn, please.

Thanks, Marika. So now let's dig into the detailed numbers. I'm going to Slide #6 directly. And we do see that the top line in the end came in at nearly EUR 445 million, which is a growth of 4% versus 2019. If we would adapt for the newly acquired company in GmbH, the growth is 3% organically. EBITDA adjusted came in at EUR 42.5 million. Here, guidance was EUR 42 million. So a bit ahead. We're down compared to 2019, mainly for the reasons we have reported all year long, which are highlighted on the right side in the bullet points. So we do have operational and cost uplift, mainly in the Americas and U.K. and APAC region of roughly EUR 2 million, but we do have significant underutilization, which we have experienced in Q1, Q2 and partially in Q3. And we have conducted some restructuring measures, which have cost us EUR 8.8 million. By far, the highest number we've done in the last 15 years. And therefore, we see, in the end, a reduction on the EBITDA adjusted level, which pushes through all the way down to the EBT. The EBT came in at EUR 14.1 million, roughly EUR 1 million ahead of our guidance from June, which was adapted for COVID and stood at EUR 13 million, and I will come back to the tax rate a bit later. Let's move on to Slide #7, with more insight. Marika was already talking about the fast-growing technologies, which is the graph on the left of the slide. We have seen 42% overall growth to 42% of our revenues, coming from 30%. And so a steep increase in our fast-growing technologies, which are highlighted at the bottom, is focused around DLT/blockchain, artificial intelligence, data analytics, cloud and dev ops. Looking at the middle segment of the slide, client concentration risk, we do see that we do roughly 80% of our revenues with clients below EUR 30 million, and we still have 21%, as Marika highlighted, with 1 of the top-2 clients, Deutsche Bank. You see the spectrum we have highlighted on the bottom, we have a shift of 1 client from above EUR 30 million to slightly below EUR 30 million. That's why we see big moves in those 2 columns of bigger EUR 30 million and bigger EUR 10 million, which is Banco Sabadell. They moved from EUR 31 million to EUR 29 million. So a slight shift, but it looks big in this graph. And what is important that the clients above EUR 10 million, which is combined roughly 50% of our revenue, these are the very efficient clients when it comes to delivery and sales efficiency. When we look at the clients above 5%, which we have grown heavily in 2020, these are quite efficient clients, and we would like to move them further up. And all the clients in the area below EUR 1 million, which stands for 1/3 of our revenues, this is part of our land and expand strategy. And they, for sure, are not yet that efficient. These are investment clients from a sales and delivery perspective. Looking at the right side, the sector split, Marika already named part of them, banking has reduced its share of our overall revenue to 75% from 80% in 2019. Main impact here is the reduction in Deutsche Bank. All other clients were partially growing. Looking at insurance, we have grown to 14% of our overall revenue, which is a growth of 20%, 23%, to be precise. And on the industry side, we see a growth to 11% share of the overall revenue. Main impact here is the newly acquired company in GmbH. So that's the main driver there. Let's move forward, Slide #8, look at the quarter itself. So Q4 came in higher than expected. You remember our guidance for the year was EUR 440 million. And now we delivered nearly EUR 445 million. And it was all upside coming in Q4. When in the Q3 reporting, we said that since September, we're back to normal, I think we can prove it now with the Q4 numbers. Comparing Q4 to Q3, first of all, we see the steep increase in revenues, but there was also a steep increase in billable days because Q3 is holiday period. It was COVID-impacted and had less billable days. Q4 had a lot of billable days. On the profitability side, we see versus Q3 that we're pretty much in line with Q3. But we have included nearly EUR 3 million of restructuring costs in the fourth quarter. This was the final restructure of the year, which was done only in Spain on management level. So if you add the EUR 3 million, you see -- we see an increase on operational EBITDA, which is only not shown because of the restructure cost. Comparing to Q4 of last year, we see a growth of roughly 4% in revenues and on the EBITDA adjusted side, if we would include restructuring costs on both ends, we would see an increase of 5% of EBITDA adjusted. So we are back on track. We have the COVID dip, as we can easily see, right, on this slide in Q2 and Q3, and we have a come back in Q4, which will continue in 2021. Let's move forward, Slide #9, revenue breakdown by segments, Americas and U.K. and APAC. On the top of the table, we see organic growth of 17% versus previous year. In the 9 months numbers, this number still stood at 14%. So we have increased speed in organic growth in that region, especially in Brazil, Canada and Asia. We do see FX impacts, which mainly happened in Brazil and Canada, where the euro has strengthened, and so that is a negative of minus 8%. Looking at Continental Europe, here, the decline in our top-2 clients wasn't fully compensated by the other clients. We see a minus 3% in organic. Probably here, we are most COVID impacted. The M&A effect is the newly acquired company in GmbH with roughly EUR 5 million of revenues contribution. Moving forward, Slide #10. Let's dig down that one level deeper, as we have done over all the last quarters, and differentiate between all other clients and the top-2 clients, which is Barclays and Deutsche Bank. Today, it's mainly Deutsche Bank. And only focus on the last line of the table. We do see that the Deutsche Bank business or the top-2 client business is down 22% versus previous year. So in numbers, EUR 27 million. Quite an impact, but expected. By that, the top 2 share in revenues has reduced to 21% of our overall business. Looking at all other clients, we see an increase of 14% across all of GFT. Marika mentioned this slide before, this number came down a bit since Q1. So we saw a COVID impact here. Going back in Q1, we had a 22% growth with all those other clients. And it's been declining ever since, but it has stabilized in Q4. And therefore, we came in at 14%. And when you look at the regions above, it's a bit more growth in the Americas, U.K. and APAC region for the other clients and it's a bit less in Continental Europe, where the COVID impact was tougher on us than in Americas, U.K. and Asia. Let's move forward, Slide #11, profitability by segments. Well -- and it doesn't matter which KPI you look at, EBITDA, adjusted EBITDA, or EBT, the story is always same. On Americas, U.K. and APAC, we have seen the revenue growth lead to good utilization, increased earnings contribution and margin improvements. That's why we see an increase of profitability there. When we look at Continental Europe, it's all about the restructuring costs and the underutilization, which has hit us in 2020 heavily. Therefore, we are below 2019. One-offs, so we should see a steep rebound in Continental Europe next year, while Americas, U.K. and APAC will just go on positive. Let's move forward, Slide #12, revenue breakdown by countries. We see that our biggest client is -- not the biggest client, biggest country is unchanged. It's still Spain, followed by U.K., Italy, Germany, Brazil. It's well distributed. We don't have a real country risk here. When we look at the growth rates in the countries, which is in the middle of the slide, in the table, we do see that the countries which have a Deutsche Bank top-2 client impact, they are in negative territory. So that's mainly Spain, U.K., Germany and the U.S., while other markets, like Brazil, Canada, France and Hong Kong are the standout growth regions of GFT right now. So we do believe, next year, this will look better, that it will look more positive in probably nearly all of the countries. Moving forward, Slide #13, we always show this, the 30 biggest clients of GFT in 2020 and they stand for roughly 3/4 of our revenue. And we have 6 new entries compared to 2019. We always put a blue box around them. And in the banking side, we see it is 4 new clients, 3 coming from Brazil, Banco Original, Banco BV is Banco Votorantim, and Itaú, 3 Brazilian banks, and we have a German client, Volkswagen Financial Services, who also made the list. To be on this list, we need at least EUR 3 million of revenues with the client because that's where the top 30 list cuts off. On the insurance side, we now have 4 -- 8 clients in the list, 3 coming from Canada, 2 new ones, Desjardins and WSIB. And the others are very spread across the markets of GFT, Spain, Italy, Brazil, Germany, France, in there on the insurance side. And industry, we only have 1 client that makes it to the top 30 list, which is TRUMPF. And maybe again, highlight industry was probably the sector that was most heavily hit by COVID and therefore, a growth there was toughest in 2020. We see the rebound in '21. But for 2020, we did not achieve our goals, and that's why we were stuck at 11% of our overall revenue, but story to be continued in '21. The new slide on Slide 14, and this one is to document our sales strategy success. And the table itself clusters all GFT clients in revenue groups. And it's purely the number of clients in those groups spread over the different years for comparison. And there are 2 main messages here. And the first is in the first line of the table, the clients below EUR 1 million, they have steeply increased to nearly 350 in the COVID year 2020, and this is securing our land and expand growth strategy for the years to come. So we need those new clients to be able to move them into the lower revenue categories and grow them over time. And the second good news is we have 54 new qualified clients, as we call them. You can't exactly see them in the table, because it's a blend, it is a mix of different rows. These are 54 clients, which we did not serve at all in 2019. And we have already generated more than EUR 100,000 in 2021. So it's not just a workshop client or a little project. It's a real client. And let me tell you, the biggest one of those contributed EUR 2.8 million in its first year, not having served them in the year before. So that is a good success for us. And when we talk about the guidance later, the guidance is based on this client's success with documenting in this table. We'll probably bring this table up rather once a year than every quarter, but it's, I think, an interesting view at GFT client mix. Going to Slide #15, the P&L, not really much to talk about. And usually, I talk about only this fourth bullet point on the right side, which is the efficiency of personnel expenses and purchase services versus revenue and it stood at 81%, excluding restructure costs in 2020 comparing to 79% in 2019. While this, for sure, indicates we had underutilization, as indicated on the initial slides in the beginning, and this is the number we truly need and want and will improve in 2021. On top, I would like to highlight the tax rate. The tax rate came in at slightly below 30%. And it was burdened by the distribution of profits inside GFT Group, some countries, especially the ones with high restructuring in negative territory, others compensating, but then with the relevant tax cost, therefore, the tax rate is nonoptimal in 2020. It will get better in '21, where we see it at 25% again. Going forward, Slide #16, the cash flow analysis. And here, I would mainly highlight that, overall, the financial structure is very well intact. Our overall net debt at the end of the year stood at EUR 31 million, so it is slightly below 1x EBITDA, which gives us adequate headroom for potential further M&A. Second thing I would like to highlight is the operating cash flow really standing out this year. We had a steep decline in working capital. And -- well, we have big clients, and they tend to pay us at the year-end, a bit hard to predict. Sometimes it's December, sometimes it's January. 2019 wasn't that good. 2020, it was really good. We got a lot of money at the end of the year and not only in January. Therefore, operating cash flow looks tremendously high at EUR 60 million, impacted roughly by EUR 20 million in working capital changes. We do see that 2021 client payments will continue to be good, and we have a strict management rule on those. Financing activities is mainly dividend payout and payback of loans. And on the investment side, we have the acquisition of the in-GmbH, the acquired company this year, and the rest are investments in IT and infrastructure. Let's move on, balance sheet. Really not much to talk about on the balance sheet side, everything quite stable. We do see a reduction in overall balance sheet total, which is triggered by the reduced receivables from clients that I already talked about with the operating cash flow. So that's the positive side. Moving again forward to Slide #18, looking at employees utilization and attrition. Let's start with employees. We nearly made the 6,000 number at the end of 2020, growth mainly coming from our growing centers in Brazil, local market and nearshore and Poland, mainly nearshore, into many locations of GFT, London, APAC, Italy and Germany. Overall, the average number of employees, '20 versus '19, increased by 11%. Utilization? Well, we talked about it. It wasn't good in the first half year, right? Q1 was partially self made, Q2 was fully COVID related. And since Q3, we're coming back, and Q4 was really good. And we see the year 2021 going forward at that 91%. So we can't catch up on lost utilization as a services company. Lost hours can't be compensated later. Therefore, we saw the underutilization. We did the restructuring midyear. And for sure, the restructuring then also supported a higher utilization in the months to come. On the attrition side, attrition being unwanted levers, we see a significant reduction over the year, now at 10% for the trailing 12 months at the end of 2020, while for sure that was COVID influenced, people not moving jobs as easily. But that said, we have never hired more people than in 2020, roughly 1,700 people, covering our growth and attrition inside GFT. So yes, people are moving, but at least we are able to move people to GFT, and we will continue to do so in the next year. Therefore, we see strong demand for our people, but we also have an attractive employer branding to attract talent to GFT. That said, we go forward and we come to the outlook. Marika, it's back to you.

Thank you very much, Jochen. So let's go to Slide #20 and let's talk about the outlook. I think it's very clear, no doubt, digitization is the mega trend, and it will drive our growth. Probably also for others, but definitely for us. And our perspective is that it's still a long way from reaching its peak. So this will accompany us for the next years. We expect, for 2021, a continued high-growth dynamic in Americas, in the U.K. and in the APAC region. And for Continental Europe, as Jochen also explained, we expect to come back now in '21. If we look into the sectors, we do see new digital banking concepts emerging, especially in APAC. And our positioning in APAC allows us to participate on this trend early. For example, we have launched Bank Light, which is a new banking solution which enables clients to set up a complete digital bank based on cutting-edge technology much faster than before. Therefore, we will see also growth in the banking sector. Insurance, we believe that for 2021, it will continue with high demand. We expect to grow insurance to a revenue share of 18%, especially in Canada, France and U.K. And after a difficult 2020, we expect our business with industrial clients will pick up and grow to a revenue share of 13% in 2021. Certainly, we will continue to go for the fast-growing tech markets. And in 2021, we plan to have at least half of our business in that space. And those specific targets are underlying part of our strategic principles. You can find on the bottom of the slide. We want to improve our earnings year-by-year in percentage points. But growth comes first. We aim for double-digit revenue growth, however, we will always maintain a solid balance sheet and a solid cash position. And if it fits, like in the past, we do go for acquisitions. However, organic growth remains being a top priority. And we will also maintain a shareholder-friendly dividend policy. Let's have a look on the complete financial expected results for 2021 on Slide 21. We are confident to grow 15%, again, outside the top-2 clients, which is mainly Deutsche, and overcompensate the reduction of that client. This will result in a total top line growth of 8%, and to revenue number, sorry, of EUR 480 million in 2021. Our earnings will benefit from efficiency measures we have taken in '20. Also, the additional revenues will provide additional profits, but it will still be burdened by further cost measures in 2021. Concretely, we expect our adjusted EBITDA to grow by 18% to EUR 50 million. The EBITDA will also grow by the same 18% to EUR 47 million, and our EBT should jump by 70% to EUR 24 million. Let me summarize, 2020 for us has been a proof point that against the backdrop of a pandemic, we were able to accelerate our strategy. And consequently, we had a good start into 2021, which allows us to look positively to the future. Thank you for listening, and I would now hand over to a moderator to start the Q&A session.

[Operator Instructions] The first question is from the line from Knud Hinkel from Pareto Securities.

Yes, it's Knud Hinkel from Pareto. I got a couple of questions. A lot of -- on numbers I see here, but also, maybe starting with more fundamental questions. First question would be, you achieved very good growth with the high-end technologies and strive to do that also in the future. My question would be doing the math, that means, from my point of view, that the bread and butter business and that you always show, the cruise ship I think is what -- bread and butter is the right expression, but something like that. Is it shrinking by intention? Is that you're moving away resources from that kind of business into other businesses? Or is it are there other reasons for that? That would be the first question. The second question, I find it very interesting to see the strong increase of small clients with revenues below EUR 1 million. I would like to it if you could give some hints, what is the composition of that client with regard to your differentiation between banking, insurance and industry clients? That would be my second question. My third question, now I come to the numbers. I wonder if you can say something on the profitability of top-2 clients and other clients? I would be interested -- I mean, there's a lot of moving parts, I guess, with regard to projects, if the profitability of these 2 groups stays roughly the same over time in the last couple of years? That would be my third question. My fourth question, your guidance, it seems that EBT is going -- you guide for a much stronger increase of EBT compared to adjusted EBITDA. Maybe you can explain a little bit why this is the case? And fifth question, I'm asking always, could you already give a guidance how much of restructuring expenses you see in 2021? And how much of expenses for underutilization?

All right. Let me start. First of all, Knud, good to talk to you. Let me start with the guidance -- no, let's start with the restructuring. We have budgeted for roughly EUR 4 million of restructuring. So another bigger number in the year '21. Remember, it was EUR 8.8 million in '20. And it was roughly [ EUR 4 million a bit ] in 2019. And we see a bit of a last fallout from the top 2 reductions. And therefore, we have budgeted for EUR 4 million. Please remember a classic normal GFT number, which we have every year, which is EUR 1 million to EUR 1.5 million. So it's still exceeding that, and that's included in this guidance. There is no plan for underutilization. We plan to be on a good utilization throughout the whole year. On the profitability side, yes, well, the gap between EBITDA adjusted of '19 and '20 is exactly EUR 7 million. And you do see that the IFRS 16 effects are reducing. We have reduced office space, and there have been some effects of lower cost from that. And therefore, it is showing a reduction on the EBITDA adjusted side for that reason. But the EBT shows the true improvement of the EUR 10 million. I think the EBT is probably the number that better reflects the improvement than the EBITDA adjusted. I know we do have a bit of a funny number on the -- in Factset, and you highlighted it in your comment. We have to fix that with the Factset guys because they are mixing EBITDA adjusted, not adjusted. So there, the numbers are not right when we do the consensus combination of our 4 main analysts. It is mainly the IFRS 16 difference between what you saw so far and what we're now guiding.

So let me answer your other questions. Your first question was whether we shrink our bread and butter business consciously. And here, I need to give you a bit of more background. What you call bread and butter business, I know you're highlighting Jochen's cruise ship picture, which he always presents in the investor roadshows. The old bread and butter business is mainly application management, so-called on-premise, so in the data center, with old legacy technology for our clients. That business is shrinking, and it's shrinking consciously. Why? A, clients are moving to cloud, moving to new technologies. So by definition, that business is shrinking. Or the clients are simply trying to benefit even further from labor arbitrage and moving to cheaper vendors, predominantly in India or Russia or the Ukraine. However, the new tech business, which we're doing, will also result later in bread and butter business because regardless whether these technologies are cloud technologies or new technologies, also those applications have to be maintained, continuously developed, et cetera, et cetera. So we are exchanging over time the type of bread and butter business, but we will also have -- we will always have as sort of a bread and butter business. But at the moment, we are in, let's say, changing mode. Clients go a lot for new projects and new applications and new business, which is attractive. But this will later on, again, result again in application management services, which we intend to continue doing so until clients think it's so under control, they can move it to cheaper vendors, which is normal for us that we have a change in our portfolio. Then another question you had was whether the composition of the clients below EUR 1 million, the ones which Jochen described as land and expand, in which sectors they are predominantly. It's actually predominantly in insurance and industry. Why? It's an industry because there, we start usually with small client engagements, small proof of concept. Hence, we win a lot of logos, as we call it. But also in banking, it's still a lot. It's not a lot of clients in insurance. Why? The way we are positioned in the insurance sector is we'd rather go for a big digital transformation programs, which by definition means you win 1 client and that's it. And then you do not just do 100,000, but actually immediately millions. So it's a different type business. So the nature of the client -- of the newly won clients is heavily banking, followed by industry, unproportional to the revenue share of industry and then very, very small in insurance. You had then the third question, which I would like to ask you to repeat. You were asking for the difference in profitability of different groups, but I haven't understood which group you asked.

Yes. My problem. And yes, I was alluding to the profitability of top-2 clients and other clients, whether the profitability is, for instance, in terms of EBITDA margin remains -- or has remained stable over time. So whether the change of projects leads to changes in profitability?

Yes. I think a number we quite often talked about is sales efficiency in that context. The project margins of the top-2 clients, other clients and the newly won business isn't that different. It's pretty much the same across the board. But when it comes to sales efficiency, meaning cost of sales for that account, the revenue of that account, for sure, the big accounts are more efficient, far more efficient. Deutsche, working at a roughly 2% to 3% sales cost ratio and our average other clients. All the others combined, we stand at 7.5% to 8%. So there's a 5% gap. Whenever we lose Deutsche revenue or top-2 revenue and we gain the same revenue with other clients, it comes with a 5% increase on the sales cost side. But therefore, we are waiting for the Deutsche Bank to flatten. And as you can see, and we have highlighted in the appendix the first slide that the Deutsche Bank is coming close to flattening. This impact will reduce, right, because we will not have to compensate with higher sales costs. At the same time, we want to grow more and more clients into the bigger than EUR 5 million block. And there, sales efficiency kicks in again. So that's the strategy over the coming years.

[Operator Instructions] The next question is from the line of Andreas Wolf from Warburg Research.

It's Andreas Wolf, Warburg Research. My first question would be also on the new client wins, which are obviously in the industrial sector. My question would be what type of projects are you usually carrying out here? Just to get a better understanding. So is it kind of IoT projects? Is it more data related, as obviously, you have a strong footprint in data analysis, et cetera, in handling data with your financial sector background? And then also related to this client group, how big can these projects or these clients become going forward? Are these mainly activities right now where clients are testing? Or are they looking for a strategic digitalization partner? If you could maybe provide some insights here that would be helpful. And then my -- or maybe you can answer this one first, and then we'll step to the next one.

Very interesting questions. So the main project we do, for example, newly won industry clients is using our IT platforms, things open online, to collect data of, for example, the factory or certain processes in the factory. And then mainly would be to create a dashboard, so that a human being then can take decisions or even adjust it with artificial intelligence functionality so that there is a certain automation insight. So it's true. It's a lot around, I would say, data and IoT in that aspect. How big can these clients go? Well, to the roof, right? Depends on the client. There is certainly a difference whether you do a POC for Daimler or whether it's for a small, midsized industrial company in Germany. But yes, it always starts with a proof of concept, 50,000, 100,000, 150,000-ish, which they usually do, let's say, in the first year, then they learn themselves what it means for them. So it's not an immediate jump in growth. We expect -- we usually think a client takes usually 2 years to develop to a certain size. And then it really depends on the client. I mean, it's logic, right? If a client has an overall budget of, let's say, EUR 10 million for IT, which I would consider for a small, medium enterprise client in Germany, then obviously, we cannot just generate EUR 5 million out of the client. It's impossible. He has to pay hardware and other stuff and licenses. But obviously, if it's rather, let's say, EUR 3 billion, EUR 4 billion , EUR 5 billion, so [ EUR 1 billion client ], like one of the large German industry organizations, then it could probably go to EUR 5 million per year. Then it could go to EUR 10 million per year? That's big, honestly speaking. So I would say those type clients rather go between EUR 1 million and EUR 5 million. That's where they usually should land. The good thing, however, about that is, as we use our IoT platform, this, by definition, goes much faster into recurrent revenues than on the banking or the insurance side. So whilst the revenues might not be that impressive, different, for example, to insurance clients where we do big digital transformation programs, which are multimillion per year, like La MACIF, you talk immediately EUR 10 million, EUR 15 million per year, or Desjardins. On the industry side, we rather talk between EUR 1 million and EUR 5 million, but much higher margin. Really much higher project margins. And obviously, less sales cost because it is recurrent. So that is why we go there. It's less for the revenue, it's more for the margin.

Okay. So the revenues are kind of transaction-based or data volume-based?

Yes, that's the future, not yet today. POC is still a POC, which means you implement the solution, you do the project. Usually, you just charge them for, and they pay for. But then the next, let's say, the next stage then would be going more into a transaction-based recurrent base business, which I consider we land in 2021, and then '22, '23, we should expand on that.

Okay. And then my second set of questions or second question would relate to, let's say, margin improvement potential going forward. If I just look at GFT historically, personnel expenses as a ratio compared to revenues were a couple of percentage points lower than they are nowadays. I'm just trying to figure out what this means for your midterm revenue margin potential because, obviously, there is -- one can get the impression that there is some other effects also going on than just the restructuring impact that we saw over the last couple of years. So maybe you could also shed some light on how you see the progression here going forward? That would be helpful.

Happy to do so. Well, already reflected on the impact it had that we have lost business with our top-2 clients and compensated for it with many, many smaller clients, which we are now growing and that has a higher sales cost to it. This will stabilize with the top-2 clients stabilizing. So that is a positive trend into the future. At the same time, we do see that the growth rates were currently showing 14%, 15% growth with all other clients outside the top 2. Seems to be sustainable. This is at least what we see for the next 2 to 3 years. And maybe COVID even supports that. It doesn't hinder us. So from that perspective, we do see top line growth, and this will lead to scale, right? On the bottom, we do always have seen scale effects that we see with the continuous top line growth. It makes utilization better, easier and to manage the productive team more efficient if you have a quite steady growth rate. And this is what we envision for the years to come, and therefore, we will see a pickup on the margin side. And yes, we do feel comfortable with the guidance we're giving today.

The next question is from the line from [ Lu Karsan ] from [ Unulos ].

Just one clarification question. [ Dr. Ruetz ], you mentioned EUR 4 million of restructuring cost in 2021. But I -- if I calculate the difference between your EBITDA reported and your adjusted EBITDA for 2021, it's just EUR 3 million. So just to get there, a better understanding what is included, including between your EBITDA adjusted and reported of [ EUR 50 million ] and [ EUR 47 million ].

Yes. That's the challenge of the word adjusted. Everybody uses it to his liking. There's no rule. GFT only adjusts for M&A effects. If you look at Slide 21, we put it on the bottom right, we owned -- the only adjustment we do is for M&A. This means the EUR 43 million you see for 2020 is including EUR 8 million of restructuring costs. This is including EUR 4 million of underutilization. And the next year is including no underutilization and EUR 4 million of restructuring costs. So the gap between EBITDA adjusted and EBITDA is only M&A.

Okay. Got it. So in...

[indiscernible] word adjusted, right?

Yes. So we can keep in mind that to your normal number, you mentioned before the EUR 1 million to EUR 1.5 million. So we have around EUR 2.5 million in some kind of space?

Exactly, which we should, if everything goes normal. See you in '22, right? If we would go down to EUR 1 million to EUR 1.5 million, which would give us the uplift on the profitability side.

The next question is from the line of [ Stefan Wentling ] from [ ESA Holding ].

Two questions, please. How much visibility do you have on Deutsche Bank? What are the chances it might even stabilize or grow given that Deutsche Bank has also announced the intention to move to the cloud and that you're pretty strong in cloud project? The second question is on APAC. What are the growth plans? What is the growth budget for this year? And what are your ambitions for coming years? And what kind of projects do you typically have in APAC?

Happy to answer. So on Deutsche Bank, we do have better visibility than the years before. On -- actually on the slide deck on Page #23, you can even find the numbers which we currently take into account for our planning. So in 2020, we recorded EUR 95 million of revenues in Deutsche. And for 2021, we are planning EUR 79 million. Whilst this is still a reduction, it is true Deutsche Bank has decided to move to cloud to Google, we are engaged into newly won Google projects. We're also engaged into, for example, the [ post bank ] migration for the integration. So we do win new business with Deutsche, which is very good, very strong. And therefore, we expect latest in '22, it will flatten. And it will -- we will probably go again down in '22. We can debate how much, extreme maybe to EUR 60 million, maybe to EUR 70 million. EUR 50 million would be very, very low, honestly speaking. Can it go -- can it even stabilize at EUR 80 million the year after? I would say, technically possible. But let's see because we still see a reduction in Spain. However, we also have decided, as part of our diversification strategy, that no client in the future should account for more than 15% of GFT revenues as we have experienced what it means if a heavy client concentration risk materializes. And you can believe me, personally, I do not want to go through this again. So I'll make sure that we stay diversified on that part. But yes, we continue selling to Deutsche, and they happily buy from us. So our relationship is very intact. Now APAC, well, that's my beloved region, as you can imagine. We entered APAC in '18 with nothing than just a backpack. Honestly speaking, not even a legal entity, certainly not a brand in APAC. And we have been able, as you see, to grow that significantly. We already show more than EUR 8 million for Hong Kong. There is another bits and pieces in Singapore. So altogether, it's already EUR 10 million. We opened Vietnam, a delivery center, which we already have a decent amount of people. Our growth plans, given the size of revenues, so we roughly speak here EUR 10 million for 2020. Obviously, percentage-wise, are ambitious. We definitely want to grow at least by 50%, if not double. That's possible in that market, honestly speaking. And yes, we will continue to grow. However, we will not become a mass supplier in APAC. The positioning we're striving for in APAC is rather the one of a niche player because every large Indian professional service company is there and competes heavily on pricing. So no way we could win that. We rather have positioned us with our distinct, clear expertise on banking and new technologies. And this has been proven by one of the big projects we have won, which is the implementation, the setup of a digital bank, and it's live, it's called Mox. It's a subsidiary of Standard Chartered, one of the leading banks in Hong Kong and Singapore. And we have fully developed that solution. We are the partner for Mox and for Standard Chartered on that. And that is something which we can see to continue because more than 50 digital bank licenses will be handed out in Asia over the next 2, 3 years in the various APAC countries, be it Malaysia, Philippines, further licenses in Singapore, et cetera. So this is the push. Digital bank is literally, you could say, it's an online bank, you would say, from the old days. But obviously, with the newest technology, newest core banking system and very fastly set up and very fancy. And as we have developed the first one in Hong Kong, very prominent and deliberate, and we used a very cutting-edge core banking system based on smart contracts, blockchain technology. I see a lot of opportunity for us there.

Follow-up question. Can you also comment on the partners with whom you are working on these digital banks in Asia?

Yes, I can do. So we obviously work with the hyperscalers like GCP from Google, AWS from Amazon, potentially, not yet, but it's technically possible with Azure for Microsoft. But also more important, we also work with core banking partners like Thought Machine. The Mox solution was precisely developed on Thought Machine, which is a U.K.-based startup, and AWS. And another partner we could use is a Mambu, which is a German startup based in Berlin, who also developed a core banking system, and [ Modelo ]. But we also partner, for example, with one of our clients in Switzerland, Custodigit. Custodigit focuses on tokenization and also using DLT technologies for securities. And for example, one approach we do is to partner, not only work for Custodigit as their partner to implement the platform, but help them to take the platform, for example, to APAC and sell it there to other banks. So these are the main partners. So you can see very different partners, not the classic ones like HP, et cetera, et cetera, but more the hyperscalers and newest technology providers.

The next question is from the line of [ Jan Erik Schmidt ] from [ Lois & G. ]

And just 2 quick questions. First, on the non-top-2 clients, you're guiding for roughly 15% of growth. Just wondering, talk -- you mentioned the kind of slowdown in Q4 on those clients. Just wondering what gives you confidence that those clients will grow by 15% in 2021? And second question on utilization. Just wondering if the ratio of personnel cost and purchase services is going to be lower than 2019, given the higher utilization you're kind of like guiding for, given 91% in Q4 and even stronger in Q1 would -- up until now? Just wondering if we're actually going to go down to those 79% again? Or how quickly is this kind of like comeback is going to be on the cost side?

Perfect. Let me pick them up. Non-top-2 growth -- sorry, there might be a misunderstanding. The plus 14% is the yearly number for the full year, right? So we started with 22% in Q1, and then we had a slowdown in Q2 and Q3, but Q4 accelerated again. But the 14% is just the blend of 12 months. Therefore, it might be a bit of a misunderstanding in that respect. Now we do see a positive trend for the other clients going into 2021. So the 15% is clearly realistic. On utilization, yes, that's what we see. The 91% utilization, which we show, is probably -- it is the target number for this year. Take into account this 91%. Why don't you get to 100%, could be the question, yes, because we always need to onboard people. We have attrition. We always have 10%, up to 15% of our teams leaving us. So they come back. We need to onboard them. We need to train people. And sometimes there's just a downtime between projects. Therefore, 91% is our target number. And that's what we're going to achieve this year. And yes, this will bring us closer to the 79%. I'm not sure we will get to 79% immediately, but that's the target to get back down below the 80% of all personnel costs plus purchase services versus revenue. As I said, the 81% is not satisfying, this was including underutilization. 80% should be given. If we reach 79%, as I said, then I feel comfortable with this guidance.

Okay. And just a quick follow-up. Given that kind of like 91% seems to be quite an optimized utilization level already, what kind of like circumstances do you need to actually get to one of the numbers like 78% that you had in 2016 and 20 -- not 2017, I think it was on 2018.

Yes. Pricing. Of course, this is sales admin and pricing in the end, right? Because if we do have sales and admin cost and people cost as well, the more we grow, the more efficiencies we generate and the second level is pricing. These are the 2 levels -- these are the 2 ways of improving that ratio.

Yes. And let me add. Obviously...

What I'm asking right now is not on the levels you kind of like wish it to be.

Correct. When you compare it to very old data from 2015, when we still had 60% with top-2 clients, you would see it was more efficient. But the sales efficiency we were talking about earlier is part of it, right? It's part of this game. And therefore, it was easy to get a good efficiency on the personnel versus revenue cost when you only have 2 clients and you do 40% with other clients. Now we are far better distributed across clients, but that increased our sales cost somewhat. Now with size, we will get scale back.

Ladies -- there are no further questions at this time. I hand back to Marika Lulay and Jochen Ruetz for closing comments.

Thank you very much for attending this call and discussing the financial numbers of GFT. There are no further questions. I think the weather is nice and shining, at least here in Stuttgart, so as much as you guys might be in home office as well or in the office, I wish you a good day. Stay safe and healthy. And speak to you, for sure, when we publish our final numbers, and then again, the Q1 numbers in May. Thank you very much. Bye-bye.

Bye-bye.