Heidelberg Materials AG (HEI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the HeidelbergCement Analyst Call. [Operator Instructions] I would now like to turn the conference over to Christoph Beumelburg. Please go ahead.

Thank you, operator. Good morning, good afternoon, everyone. Welcome to our analyst and investor call on the partnership with Thoma Bravo and the investment in Command Alkon. We announced this exciting transaction last night at around 6:00 p.m. CET. So it's great that you could make it to the call at such short notice. In the call, as always, Dominik von Achten, our CEO; and for the first time, Dennis Lentz, our CDO, will go through some prepared remarks. And if you haven't done so, you can find the presentation on our IR website, where you registered for the call today. After the presentation, we have ample time for questions. So over to you, Dominik.

Chris, thanks a lot. Thanks to all of you for joining, and thanks also for Dennis to join us here as our new CDO as of September 1. So we start with a splash in the water. And you will be probably a little bit disappointed that I've read some of your reports from last night, and I have to say, it's good that we have this call. It's very important to have this call because none of you has actually captured the reason why we took this transaction. And let me take you through the reasoning of that. Let's step back for a second and go back to beyond 2020, where we basically said we are going to stand firmly as HeidelbergCement on 2 pillars. One is our core business that is very cash rich, very professionally run. Are there still room for improvement? Absolutely. And we are tapping those. And we've mentioned the portfolio management, the margin expansion, and I think we are well on our way. Secondly, a little bit in the background at the time. We said, obviously, we are going to push for transformation because we know the industry needs to transform. And we want to be the leader in 2 dimensions. One is a sustainability topic. I think there is no doubt out there that we have taken the leadership in that role, and stay tuned, we'll continue to expand that leadership. Digital transformation at the time, everybody was asking what the heck are they up to? First, industrial tech company, what are they trying to do? And I think that's the reason we have this call today to share with you what we are to. And the reason I made my statement at the beginning is because the core idea of this transaction is basically to bring something to surface that all of our investors have already paid for. That's data. We are selling currently our physical products for nice margins in different markets, but we produce every second millions of data points that are sleeping in our balance sheet, in our assets that are not used. And we have learned this over the last 4 years through our digital journey. I know we have not made a big fuss about this, deliberately, not so, because with HService, HProduce and HConnect, we have realized the power of the data, and we have also realized that there is a way to monetize this data. And that is exactly the reason we do this transaction. It is monetizing the data that we are producing that our investors have already paid for. It is not replacing the existing revenues or the existing margins, it's actually putting additional growth and additional revenue and additional margin potential on top of the existing setup. And that is the purpose of this transaction, nothing else. Some of you have speculated in your first report, are they now combining their digital business with Command Alkon or Thoma Bravo, the clear answer is, no. We are going to stand on 2 digital pillars. One is our HConnect, our HProduce and our HService that is completely untouched from this transaction. We will build on this with interfaces also going into the Command Alkon relationship that it absolutely our proprietary asset and it will remain so. And it will continue to be built out. In fact, we will accelerate the journey because the traction we have seen with almost 20,000 monthly active users globally is very good indeed. The growth rates are phenomenal, which tells us also -- and that's the other point, I think it's very important for you to understand. From our perspective, the industry is at a tipping point in terms of digitalization. You know this -- everybody has been around for centuries in this industry. It's highly inefficient in many instances. And it's probably the last very large industry to tap into in terms of digitalization potential. And through our own journey over the last 4 years, we have clearly realized there is so much potential out there that we've decided internally to switch gears and basically go faster and accelerate the journey along that idea and along that dimension. So again, going back to my original remark, this is adding on top of our remaining offline business. Cash flow, revenues and margin, the idea to unlock additional revenue margin streams from the data we own anyway, and we produce every day. And the reason we were the perfect partner for Thoma Bravo is because through our digital platform, we were able to access this data basically real time. This is the pinch point that puts us into a core position in order to strike this transaction. Now why Thoma Bravo? Guys, we are very modest Southwest German company. We know what we can do, and we also know what we cannot do. So when we said we wanted to accelerate the digitalization effort, it was very clear for me and for the whole management team. If we do something like that, we better look for the best possible partner globally. And we are convinced that with Thoma Bravo, we have found an excellent partner, who can exactly add what we cannot do. We are great in running our offline [Technical Difficulty] execution. We have one global customer-facing platform, HConnect that basically can act here as a springboard, but we are not a software provider. We do not have the operational expertise to run a software company, and we also do not have the expertise to do M&A in the software space. So in that respect, on Page 7, we clearly believe that combining the strength of us and Thoma Bravo, we are very well positioned to accelerate the growth for Command Alkon and beyond. And that also answers the question from my perspective before I hand over to Dennis, why 45%. As I said, we are modest, and we do not believe that we are the best owner at this point for a software-driven -- SaaS-driven -- Software as a Service-driven business model. So we leave deliberately Thoma Bravo in the driver seat for them to drive because they are so focused on strong growth on high structural profitability, and we let them sit in the driver seat deliberately, but we'll have a very good seat on level playing fields. And we'll come to some of the other reasons we acquired 45% later on. I know some of your questions are going along that line. But I would hand over to Dennis, who will take you through some of the logic specifically around Command Alkon, Dennis?

Yes. Thank you, Dominik. And also for the framing. Let's continue, maybe a little bit on Slide #8. And having read through your questions upfront, I actually decided to say 3 things why we did not do this deal. So it is, for sure, not giving up our digital and customer access. That's not the intent, and that's also not what we contributed to that partnership. It is for sure also not buying a stake in one of our software providers. We are actually, at the moment, rather a small customer of Command Alkon compared to other players in our industry. And it is also not to get easier access to our digital tools -- to digital tools of Command Alkon to drive efficiency, for instance, in logistics in our business. That's not the underlying rationale of that. The reason why we do it is because we were looking for a vehicle, how we can monetize the untapped digital potential of our today's asset base and to give them a second or third life, and it is also about finding and getting access to a vehicle, how we can better monetize the investments we do in our own digital customer experience. That is what it's about. And Command Alkon is the first step of that partnership together with Thoma Bravo. And now we want to use this to basically buy-and-build the ecosystem of the heavy building material industry together with Thoma Bravo. Let's -- maybe not so much go into the last levels of details of Command Alkon, I would almost say we go immediately to Slide #11. Because like I said, it's not so much the product Thoma Bravo is having today -- Command Alkon which fascinated me, it's more the usage. And as you know, the heavy building materials industry is quite fragmented on the producer side of things, but also on the end customer side of things. And that is one of the key road blocks to make good progress in terms of digitalization in that industry. And HeidelbergCement together with Command Alkon, you can consider the most powerful digital aggregation layer in that fragmented industry. And we sit together on the largest installed base and also data treasure, which you can see nicely on that Slide #11 here. It's more than 60 million tickets, which are handled. It's 20,000 sites, 75,000 trucks, more than 2,500 customers producing customers, which are bundled then on 1 platform. Once we have combined what Command Alkon calls CONNEX, together with our HConnect customer experience from a technical perspective. And maybe let me give you one example. For us, a ticket is just cost, and we have to produce it so that our customers pay us. That's an asset if you contributed into such a partnership, which all of a sudden becomes valuable because you can build SaaS products around it, which are profitable and high-growth revenue products. Slide #12. So how does better together look like? We honestly believe that Command Alkon has a very strong organic stand-alone potential itself based on this massive installed base, which they can now use to cross-sell and upsell their customer base on and also to launch more cloud-based SaaS products. And on top of that, we can act like Dominik already explained on the Thoma Bravo partnership side of things, a lot of scale into that. If we start adopting Command Alkon products, we can increase the liquidity of the platforms. We can set standards in other regions outside of North America based on Command Alkon products. And all of that together basically yields better products for our customers, a clear internationalization route for Command Alkon network effects with cross-selling and upselling possibilities for Command Alkon. And last but not least, a lot of future synergy potential to make follow-on investments based on that data.

Yes. Maybe just to add to what Dennis said, I think it's important for you to understand also the sweet spot of Command Alkon because it sounds like they are a software provider for the construction material industry, guys. They are a very focused provider for the ready-mix concrete, asphalt and aggregates materials. So we stay exactly within our sweet spot of materials. So we're not going now into the total construction area. That's not the point. We are staying in the sweet spot of our materials. But as Dennis and I said earlier, adding offline, the data layer that we want to monetize. And Dennis made the point, their installed base in North America is very high in all these 3 industries. And there is, by far, no other player. It's a very fragmented also digital software side that has any reach like Command Alkon. And that was also one of the reasons to go because as somebody at some point would have also seen that potential. And there, we have, I think, a first-mover advantage. Dennis, you...

Yes, maybe let's go to Slide #14 to make it really tangible with one concrete example. Some of you already wrote also in your reports about the CONNEX platform that is one of the fastest-growing products and cloud-based of Command Alkon. And one of the sub products they offered there is a tool called Jobsite. So what is Jobsite about? It's basically about handling e-tickets. We also work on something like that ourselves in our HConnect and customer experience, but we can never solve it as smart as someone, who can offer that across multiple producers. It's a product which does not work deep, just one vendor, multi customer, it only works broad, multi vendors, multi customers. And that is, if we have our customers flowing over from HConnect to also use CONNEX products, how we can monetize the digital potential of our own end customer experience. That's how better together looks like in that sense. And now over to Dominik with Slide #16.

Yes. Maybe just before we come to your question, guys, a couple of points as a concluding remark from our side. For us, this is really accelerating on the digitalization. And I've been very open with you also internally. Obviously, people ask what does digitalization is exactly for HeidelbergCement means. It's far beyond introducing Microsoft 365 and getting on Teams, everybody. That's not what we had in mind. And I think this transaction and our explanation makes it also to you much clearer where we want to go. And from us, as we said, we looked long and hard for the right strategic partner in that respect. And I think together with Thoma Bravo, we have a good starting point. I explained the logic in more detail earlier. Anchor investment is obviously something that you then need to get going. And we believe that Command Alkon was the perfect starting point to really make that acceleration visible and also tangible. We strongly believe, and Dennis explained that, that there is a good combination between what we bring to the table and what we keep in our pockets, but which we will open up for partnerships with Command Alkon in terms of data interaction and using the combination of the 2 for an even better customer experience than we could ever produce alone. I think Dennis has made this nice example with CONNEX. And obviously, as I said, for us, it's all about monetizing something that our investors have already paid for, but which was lying in our treasure box unused. And that's what we are up to. And that's the reason for this transaction. And I know some of you have already speculated a little bit about the numbers that you couldn't fit into your normal spreadsheets, which I fully understand. And I give you a little bit more reasoning for that. The total valuation of the Command Alkon enterprise sits at around $1.7 billion. Our cash out for this 45% stake is $250 million. So we confirm that number. And now obviously, the question is what sits in the middle. And for those of you who have speculated around big indebtedness and synergies, we'll just give you the indication that the indebtedness of the company is not the full delta between $250 million and $1.7 billion. In fact, the majority of the delta are the synergies that we realize by contributing our strength and putting that together with Command Alkon. So you were speculating a little bit around the numbers. It sits around $0.5 billion, just to give you an indication. So with that, you already see, this is not a small play from our side. This is a fairly large play. And it really also realizes great value already today for the data that we bring to the table. So in that respect, we wanted to give you some more transparency around this. From our perspective, I think that Page 18 basically gives you the summary. I don't need to go through that again. And so with that, it's important for us to get now your questions and also get into a discussion because let's be completely honest and open. This is a nonobvious transaction. It pulls everybody out of the comfort zone. And that's the reason also why we wanted to do this call. And we take all the time necessary to explain what we are to because it needs explanation. This is not so obvious to understand. And with that, I would hand over back to the operator for your questions.

[Operator Instructions]

Okay, before we get into it, this is a chance to ask the question about the transaction. So please stick around the topics, around the partnership and the investment and any other strategic question around it and do not go into current trading or so, the call is really about the transaction. Limit your questions to 2 at a time, if you can. So we get through with all questioners. The first question comes from Arnaud Lehmann from Bank of America Merrill Lynch.

Very interesting presentation. So 2 questions, if I may. Firstly, have you started to quantify the potential additional revenues and margin from this acquisition, from your ability to use or access some of these data, even if it's medium, long term, do you have any idea how this could help? I'm sorry that I'm still staying in my excel spreadsheet, so maybe that's how I should think about it. And the second question is around the risk of dissynergies, I believe companies like CRH, CEMEX or Holcim are also customers of Command Alkon? Have you discussed with them how they would react for you to be a shareholder of this company? Are they happy to become your customer and maybe with the possible risk that you might access their data, and maybe they wouldn't be very happy about that.

Yes. No, first of all, thanks for joining. Great to have you on the call. Great 2 questions. Let me start maybe with the second one on the dissynergies because that's certainly something we are taking very serious. And I think we have to be very clear. We have not talked to our competitors. This is not our -- that's not our role because Command Alkon has the relationship. It's not HeidelbergCement that has the relationship. But that's one of the reasons why we also have a 45% stake. We are not the majority owner. We are not driving the business. As I pointed out earlier, Command Alkon remains an independent company. And the data issue, we are based in Germany. We have probably the highest data privacy standards in the world, I would argue. So we are very, very cautious on the data side. There has been put a lot of language into these contacts on data privacy, and it's absolutely clear that there is no data flowing from HeidelbergCement to the one end only if we have our consent basically. And more importantly, no data come from Command Alkon going into HeidelbergCement. That is clearly a massive Chinese concrete walls built by our nice concrete. So there is no data flowing from the one end to the other. It is a topic, however, that has been discussed with Thoma Bravo, that has been discussed with us, we take this very serious. And the clear message is Command Alkon stays a completely independent company. And we respect all the data privacy laws that are out there. So there should not be any concern, not only of any of our competitors, but from anybody else. On the initial revenue and margin, I ask for your understanding, we run this as a joint venture. So in that respect, this has a different disclosure schedule. We understand that many of you are interested about how does the company progress. We will discuss this with Thoma Bravo and come to some sort of an agreement what we can disclose even if it's a joint venture, but I ask for your understanding, I know this is fresh off the press. So that's certainly a topic we have on the agenda, and we'll probably think more around what's the growth really realized? What is the -- what are the products moving in that respect, a little bit similar to what Dennis has described on CONNEX. So we understand your point. But as you pointed out in your side remarks, this is a little bit of a different animal. It has much higher growth rates, and we'll probably let you participate around that going forward in terms of transparency. And maybe just let me make one comment. Command Alkon is not a cash burning start-up. Just if anybody of you would think are they now going crazy? Are they losing their profit focus? Guys, we do not become a charity organization with this. We want to make profit for our shareholders in a sustainable and long-term perspective. So this is probably not a quarter-over-quarter decision, absolutely fair, but it's a midterm and long-term potential that we accelerate now, but it's absolutely clear that we stay super focused on growing the company and making it more profitable to make this also very clear.

If you have a clarification question, please go ahead.

Just to -- just I guess, my question was less about the actual numbers for Command Alkon, but more, I guess, the idea there is that you'll be able to capitalize on this partnership and this stake to improve the -- either sales or profitability of HeidelbergCement existing operations? Or maybe I misunderstood. So I was just trying to understand if this investment was changing anything about your core business?

In terms of -- this investment does not change anything substantially in our core business. The first indicator you get for the synergies is the $0.5 billion that I'm giving you. And that has, from our perspective, quite a nice leverage on our existing operations. And I ask for your understanding that we cannot give you any more details on that. But that's exactly what we will continue to drive. Those are synergies that we are, in the end, getting really paid for. And that's something we will stay very focused on. On top of that, you then get the question of that Dennis described in terms of monetization within Command Alkon, the products that they develop.

Next question comes from Paul Roger from Exane BNP.

So maybe a starting point then. Can you just give us a little bit more detail about Alkon as it is today? I mean you avoided the question about current profitability. But maybe if you can elaborate on that in the digital operations by region and possibly as well also the competitive landscape, just to understand how unique Alkon really is? And the second question really is a bit less about Alkon and a bit more about Thoma Bravo. I mean, does this also give you a strong and long-term relationship with them that you might be able to leverage in other ways? I don't know, is there something else in their portfolio or some expertise that might add to this deal as well?

Paul, I'll try to answer. Maybe Dennis can chip in at some point. But maybe just -- maybe Dennis, we start with the Command Alkon question. We ask for your understanding that we cannot disclose that the Thoma Bravo company. We cannot disclose revenues or EBITDA or anything on that end. But what we can disclose is a little bit the setup that I think is important for you to understand, that's also driving this transaction. Command Alkon has been around since the '70s. This is -- that's why I said, it's not a start-up. They have a very deep anchor in our business. Dennis was mentioning there. We are also a user of some of their products in North America and globally. So they have a very, very big customer base in our industry in general. Now if you tweak -- if you look at this from a global perspective, that's I think what you asked about, they are predominantly a North American player. That's their core focus. That's their biggest anchor. And by the way, this was also one of the reasons we did this because you remember, we sold the West region. Everybody said, "Oh god, oh god, oh god, is Heidelberg now leaving the North American planet?" Absolutely not. Here we are. We just come with a different setup. That's also -- so they are to a large majority of their current revenues come out of North America, but they do have a global footprint. So they also do business in other parts of the world. But that obviously is also what they are starting to dream about is that we obviously have a globally reaching platform, and that's where in the future, also some additional synergies may come from if that is to our benefit. I think that's the purpose of the exercise. Dennis, do you have anything to add on that?

Nothing to add here.

Okay. And then on Thoma Bravo, you are right. I think -- we never know what can come in the future. But I think it's clear if the relationship works out, like both sides have said it up at this point, why shouldn't we stop building additional potential if this is to the benefit of our shareholders, and that's what we are paid for. We are not paid for the benefit of Thoma Bravo. We are paid for the benefit of HeidelbergCement. But -- and that, I think, is an important point. Traditionally, I think the industry, personally, I can say for HeidelbergCement, we are more IP driven. You put your arms around your knowledge and try to build a concrete fence and then hope that nobody can come. So IP focus like, which still is true for some aspects. But it was very important for me, Paul, that we also get more into a partnership mindset. We cannot create the maximum value for our shareholders if we sit only on IP rights. We have to also open up for additional partnerships. But if we do that, we want to play in the champions league. And that's the reason why we did also this deal. And I think that answers a little bit your question around Thoma Bravo. Dennis, anything to add?

Yes, just -- sorry, go ahead, Dennis?

No, go ahead.

No, just maybe a second one on that regional point. I mean, obviously, you mentioned that they're very focused on the downstream and aggregates, does that suggest there's limited scope in cement, which would obviously be more sort of EM focused?

That's probably true. They are more downstream. But in the end, from our perspective, going forward, the downstream will also be the battleground. Because that's a little bit fragmented part of the industry. The digitalization game on -- customer platform in cement doesn't add any value. It's a nice interaction with our customers that's a must do, but there is not much you can dream about. There's a limited amount of customers. There's a limited amount of transactions. That's not where the complexity sits where you can create additional efficiency and effectiveness. The better ground sits in the much more fragmented business in the downstream. So absolutely, I would say, ready-mix, aggregates, asphalt and that's where Command Alkon has their stronghold. And that's where, I think, in the end, it will be the decisive game, who basically has the biggest potential to maximize the value for the customers and therefore, also gets the biggest part of the margin cake. And we strongly believe that Command Alkon is quite well positioned to do so.

Next one on the line is Elodie Rall from JPMorgan.

Can I ask about Heidelberg's existing digital CapEx plans, and what this transaction means with regard to your existing CapEx plans in the digital space? And second, if you have any further M&A ambition in the digital space, and this is where the financial firepower will be focusing on from here?

Elodie, thanks for your question. Let me answer, and then Dennis, if you have an additional point. But I would say no change to the capital allocation framework in general that we've shared with you in Beyond 2020. So we did not leverage up or did not do anything crazy, putting out additional bonds or anything just for this transaction? No. This is absolutely within our limits, and this will not change the promise to the capital market that we have given to you in terms of net debt-to-EBITDA leverage in terms of normal CapEx of 250 -- of EUR 1.2 billion. This goes into the normal growth bucket. So I think that's the question of your -- the answer to your first question. And the other piece is in terms of, I think, a little bit of capital allocation going forward. It's clear, the growth CapEx, everybody asks, where does this go. And absolutely, this is part of our growth CapEx bucket. But I think there was a little bit -- the assumption in your question whether we spend going forward, all of our growth CapEx in tech investments like this, the answer is clearly no. It's -- we are paid for balanced decisions for portfolio decisions. This goes into the high growth, high-margin potential, additional revenue and additional margin potential on top of our offline business, as I said, leveraging the data that we anyway produce and that our shareholders have already paid for. So that's the purpose of this deal. So will there be additional -- or could there be additional investments in the tech space, yes. But clearly not the largest chunk of our growth CapEx goes in tech only. This would be not the right balancing decision. We'll continue to grow our core business. We'll continue to work on the other strategic topics that we have disclosed and bear with us on that. I hope that answers your questions, Elodie.

The next question comes from Cedar Ekblom from Morgan Stanley.

Maybe I'm being a little bit silly here, but I'm really struggling to understand the thesis a little bit. And I want to understand how we separate the equity investment in Command Alkon and the potential there? And if there is then a separate operational benefit to Heidelberg, I'm assuming that from an operating synergy perspective with your core cement and aggregates business, you are a customer like anyone else and that being an equity investor in Command Alkon doesn't necessarily give you an operating synergy there. So can you confirm that? And then secondly, on the revenue model for Command Alkon separately and the monetization of data because I'm thinking about this from an equity investment perspective, so sort of looking at it separately from your cement and aggregates business where do you really see what the overlap is. Can you talk about who wants this data, right? So we have Facebook and they have access to our data, and that data can be monetized in different ways. How do we actually monetize the data in this industry, who wants to buy this data and why?

Okay. Very good questions. Cedar, I think we'll divide this question. I'll go for the first one, and then Dennis, maybe for the second one. Because the revenue model is -- obviously, we cannot disclose any details on Command Alkon, but I think in principle, Dennis can describe to you how this monetization works, again, in principle capital. What we are not doing, just to make sure that this is not the -- we are not selling the data of Command Alkon, we cannot do anyway and also not HeidelbergCement data nor to Google or Amazon. That's not the monetization that we are talking about. So Dennis will describe to you a little bit how this monetization works also from a software perspective. Because I think that may be an important piece. He's talked about Software as a Service. So Dennis, maybe you can in a minute talk about that. Now the other question on equity versus operational, I think it's the right way to look at this, Cedar, because those are 2 different -- if you wish to say so synergies or value creation potential. The operational synergy one is the $0.5 billion that I was already describing. That is the first tangible synergy that we will get, that we've got already with this transaction that basically goes into -- it's almost like -- it's not a discount, but it's the valuation of what we can bring to the table on the operations side, and that will continue in terms of offering, as I said earlier, offering our customers also to Command Alkon sweet in a very stringent customer experience. That's also important. It doesn't make sense if there is an interface in the end, where the customer thinks this is not real-time anymore, but it takes 2 hours to get the answer. So we will drive -- continue to drive operational synergies wherever possible with the data privacy restrictions that we have and that we will fully respect. Now on the equity side of things, obviously, that's a discussion we had also from financial perspective, you want -- how do we eventually account for this 45% stake. We said right now, it's an equity, so with the joint venture accounting. And I'll let you dream now going forward. It is clear that if we want to drive shareholder value. At some point, whether we would forever stay in this joint venture setup with equity accounting, I think this would probably not be value-accretive for our shareholders. So down the road, there may be different options how to materialize and create value with this equity investment. And that's a little bit -- or at least make it more liquid. So you can think about all different sorts of transactions down the road, including IPOs and others.

Yes. Maybe let me also chip in.

Sorry, Dominik, can I just chime in there? The operational synergies, does that mean you're getting the platform at a discount or something like that for your core cement and aggregate? I just want to understand how you get $500 million of operating synergies. I don't -- maybe I'm being completely dim, but I don't understand what is the opportunity...

Cedar, you are -- yes, yes, you're still all right. It's not so easy. It's a juggling act. Now we have -- all we can tell you that the synergies are really there. But Dennis will try to take you a little bit through the example of how these synergies come together because you are still all right. Everything is fine. And as I said, it's not so easy, but if it would be obvious, everybody could do it.

Yes. I think your question boils down to why do we need to own a share in Command Alkon, a software provider to our industry versus rather just being a strategic customer of them, right? And I think here, you need to see a little bit how things are moving in our industry in terms of digital. Very often, it's actually difficult to come up with a good business case to adopt a digital tool because everything is already so lean. It's a commodity-driven industry. And by the way, normally, the customer says, "Oh, this is nice that you have this app, give it for me for free then I just use it." And that's exactly the second point, right? So if we are not careful, digital is actually not an opportunity, but a cost factor in our industry because we adopt those great tools of Command Alkon and others. They cost us money. And it doesn't take too long, then the customers actually take it for granted and see it as a standard which comes for free with the delivery of our products. So the decision which we had to take is whether we want to make digital a cost factor, then we would have chosen to be a strategic customer of Command Alkon and other digital software providers to our industries or whether we actually want to turn digital into an opportunity. And that's exactly the decision, which we have taken. And now we also adopt those products, no difference. At one point in time, most likely Command Alkon will charge us prices, which pretty much equal the benefits which we have, which they do not only do with us, but with other customers too. That's the game digital software providers make money. But we own a share. And when we put all of our volume and weight into those products, we at least make sure that an equity investment of HeidelbergCement benefits from our weight. And through this investment, we then also, in return, benefit from it, more long term, midterm like dominant set when we make this maybe more liquid over time.

Hope this answers...

I'm sorry. I mean, the -- the point on how you actually monetize the data. I think that's actually the key point, yes.

That was the second question, yes. I'm coming back to my example. There are basically 2. The first one I mentioned was the whole thing about tickets, which is not really an asset in that sense from us where we make money out of it. Just a couple of data points, very often still on a piece of paper. But if you have access to all the tickets of our industry across the different materials, which are supplied. That is a pain point you can address through that of many customers who do not only buy material from us, but also from our competitors or surrounding producers. And this helps them to streamline their back-office processes. You can later on wrap payment processes around that, even factoring services around that. So that's things you can do if you do things across multiple producers in an industry. And that is something HeidelbergCement cannot do. And that's just one example how Command Alkon can monetize the data they already sit on, but even more, though, when we actually add our data pool to it.

So if you guys think it's important to -- for you to understand that this is a dual-track digitalization now, right? It's the digitalization of HeidelbergCement that we do to the sole benefit of our proprietary customers where we basically decide what is our digital offering that is completely different from Command Alkon. It may include, as Dennis said, products from Command Alkon. But if our customers don't want them, then, well, that's their decision. And secondly, and that's the point that Dennis said, we feel very comfortable indeed to now get into the driver seat not and only in terms of sustainability in the industry, but really be the game changer also in terms of digitalization. We see there is an inflection point coming, and we wanted to not miss that opportunity and rather accelerate it. And so there is one priority HeidelbergCement setup. And then there is a second Command Alkon, Thoma Bravo setup, and that is more an industry game changer where we want to participate and also sit in the driver seat rather than outside of the car or in the back seat.

Okay. I'm sorry, I just want to have one more question. It's still on the same topic. This revenue model for this business. So Command Alkon gets a fee from a customer to access the platform and the customer benefits by potentially having a more streamlined process, delivery to customers, invoicing systems, all this kind of stuff. And then there's potentially an additional benefit to the customer where they're able to monetize their data by Command Alkon giving them visibility on what other people are doing on the platform? So okay?

The first part is right. The second part also there, Command Alkon, to my understanding, has to respect the data privacy laws, and they cannot just -- there's also a competitive edge in this. No, no, they cannot give others the access to other -- to data from other customers. That's not -- at least my understanding, Dennis you correct me, that's not a business model of Command Alkon.

And it's also not a marketplace to make that clear, right? So in mature markets, the only things which can fly in our industry across multiple producers and vendors is orchestration. So you make the processes in our industries across the different players more efficient. And most of those players are paying or are willing to pay for that ease of doing business. And that can be contractors, that can be producers, that can also be hauliers, which are in between.

Yes, Cedar, I think it's also -- you may ask you, so that's why I said we have these dual streams, you asked about the dissynergies. If -- and that was also the discussion we had with Thoma Bravo. We strongly believe that is there a value we even indirectly now will create for our competitors? Yes, potentially, because we will contribute some of our know-how to the further development of the Command Alkon product, and do potentially our direct competitors also profit from them down the road? Yes. Hopefully, they do. So -- but that's also -- that's the setup of Command Alkon, and that's something that Command Alkon has then to decide at what price do they sell their products, what's the value they create for their respective customers. And what's the margin they make out of that. So that's why we say dual speed. Dennis?

And we will not get it cheaper than anybody else. That would really be against the principles. That's not the idea. The synergies flow from us to Command Alkon.

Thanks for your 5 questions. And thanks for being persistent. But I think it's also a benefit to everybody else in the call. So the next question comes from Yuri Serov from Redburn.

I must admit, I still struggle to understand everything about synergies and so on, and you keep on saying that you're keeping the platform separate. So to me, this looks like very much a financial investment. And you keep on saying this and you think about how to make it liquid in the future and so on. So it's a very financial-focused question. And you probably will not like the question, but I will ask it anyway. I understand that you are unwilling or bound by some rules to disclose the financials of the company, but we are analysts. If we don't have the data, then we'll go looking for the data. So I went looking for the data and the number that keeps on coming back from a variety of sources for this company is revenue of $127 million. If I use that number, that suggests that you're buying it on the [indiscernible]. So I wonder, how will -- what sort of growth rate you require in order to make a return on investment, I guess?

Yuri, you gave yourself already the answer. I cannot disclose anything. And I ask for your understanding because this is a company in the majority owned by Thoma Bravo. This is not something we can disclose, and I cannot even give you an indication on your speculation. All I said, this is a structurally very profitable company and not a start-up that is cash burning. That's the general remark I can make. And as I also said, it's very important for you to understand, this will not have a substantial impact on our financial cornerstones that we have given beyond 2020, neither to the very positive nor to the negative. So I think in that respect, this is a neutral investment, if you wish to say so on our communicated targets, but we think it's strategically very, very important and highly attractive. So that's why we decided to do it. I could do a highly strategic investment, but tell you, sorry, this is so strategic, forget the leverage, forget everything that I've told you a year ago, we just go and take the opportunity. And that's not what I've promised to our investors. I said guys, we have to hold the line on what we said, and that's what we're doing.

Okay. I understand. But maybe you can give us this when we build our forecast, can you give us some idea, some guidance as to what we should expect in terms of net profit from this asset going forward?

No.

Okay. Can I then ask again a financial question. So you said that you mentioned $0.5 billion a few times. I don't understand what $0.5 billion means. It's not in the presentation. So what is it $0.5 billion? Is that the value of the assets that you're putting on the balance sheet?

Sorry, we have to come back. Sorry, you broke off. I'm not sure whether I got your question.

Okay. When explaining the transaction, you said you're paying $250 million, but then you said it's $0.5 billion. So what is $0.5 billion? Is that the value of the asset that you're putting on the balance sheet?

It's the synergies we create. And that we get paid for in the end.

Okay. Well, so what is the value of the asset that you're putting on the balance sheet? Is it just $250 million?

Sorry. Very hard to understand you, unfortunately, sorry.

On our cash flow, we will just sit on the $250 million cash out as an investment, that's it. There is no asset transfer on the balance sheet.

No, I understand. But this investment comes on the balance sheet as a state in an associate or joint venture, which will have a value. So I'm just trying to understand what that value is?

$250 million.

$250 million.

And that gives you 45%?

Exactly.

It's still difficult to understand how that works, but okay, fine.

Yes. That's -- guys, this is what we are paid for. This is exactly what we are paid for. And that's why I think it's good to have that call exactly that's the point. We get a 45% stake on a $1.7 billion overall value of the company, and we paid $250 million for that. And we tell you the reason for that is the synergies that get respected in the magnitude of $500 million or $0.5 billion. And that's exactly why we think this is not only strategically attractive, it's also financially attractive despite the fact that this is a software company. And you know that the software companies don't trade at 6.5x EBITDA. That's also clear.

Okay. Then the final question, if I may. And again, this is a clarification on everything that was stuck here. I hope that you can clarify this. So when you were presenting the transaction and going through the slides, there was a mention of a data treasure trove a few times. But then when we started asking you about competitors and basic exchange, you said, no, we're not going to get any data out to Alkon. I don't understand how to connect those 2?

Yes. I think it's very important, and Dennis will jump on that. When we talk about data flow, we only talk about HeidelbergCement data. We do not talk about data of our competitors. That's -- sorry, we are not crossing any grounds by any stretch of the imagination. We don't -- we talk only about HeidelbergCement data. It is very important. This is nothing to do with anybody else's data. We talk about monetizing our data, and that's where the synergies are also coming from. I think that's important. And maybe, Dennis, you want to...

Data only flows in 1 direction from HeidelbergCement to Command Alkon and obviously also not without customer consent where this is necessary and then command access to their existing data treasure coming from this large installed base. And based on that data, you can then start building digital products, which you can, yes, sell to your customers, command to their customers to be precise on a subscription basis. It's also the adoption of Command Alkon products within Heidelberg cement. I think that's also a combination.

During then 2 more participants in the line. Gregor and Tobias. Next question comes from Gregor Kuglitsch from UBS.

So sorry, I'm going to try to wrap this all together, and I'm going to tell you what I understood and you tell me if I'm right. So basically, you're buying a 45% stake in this business, you're going to contribute all your data, and you will become a customer. And therefore, this business will become bigger perhaps as network effects and expand into new geographies. Therefore, it is worth more. And that's how you get from grossing up the obviously, check that you're writing, $250 million gross up, I think it's $550 million to a value of $1.7 billion. So that's like an appraisal value or whatever that you think or your partner thinks the business is worth. Is that correct?

You are very smart analyst, Gregor. This is 100% correct.

Okay. So I guess the second question is still a little bit. You talk about monetizing the data. And it sounds to me like you're not getting paid for the data, right? You're giving the data to them, but you monetize it through having an equity stake in this business. So it's not really money yet. It will become money if you IPO or if you sell. So just confirm to me that you're not getting paid for your data, you're just basically giving it to them essentially for free and you will become their customers, which...

We are not getting paid directly. We are getting paid indirectly. Exactly your assumption is again right.

Okay. And then could you just confirm to us and you sounded like you're -- it's more about you potentially bidding or reducing your stakes in whatever way, shape or form in the future? Could you just confirm to us that you would not consider increasing your stake for the reasons that you haven't gone over 50% today. In other words, if Thoma Bravo want to exit in 2 years' time or so, and they want to sell because that's the nature of private equity and private equity always wants to sell that you wouldn't go out and buy their stake.

I think, again, a very important question, Gregor. Nobody else knows what the future is about. So I can't -- none of us knows what happens in 2 years. But from today's perspective, it's clearly not our targets, and we also don't think this is the nature of the idea that we have is to make this an industry game-changing platform in the end. So it is not our intention to basically buy this company 100%. As we indicated, I think there are other options to also monetize the equity side that Cedar was asking about down the road and to make it even more liquid. So I think 1 option, as I said, is obviously to go for an IPO at some point. So let's wait and see and bear with us on that one.

Okay. And then sorry, just $0.5 billion, the $0.5 billion is your share of the synergies, right? That's the math, not the total because otherwise, it doesn't make sense, right? $550 at 1.5, it's your share.

Exactly. You're right. Exactly.

Then the last question comes from Tobias Woerner from Stifel Europe.

Intriguing transaction. Just on that note, can you describe a little bit the genesis of this deal? How did it come across your radar? And what took you to where you are today? And how did you present to the board? And the second question, to me, maybe I got that wrong, probably it did, is that it seems a bit like a Microsoft attempt to railroad the industry into a platform. Do you think that your competitors will just sit aside and let that platform be built and not rack to it? Or is it actually a potential future transaction where the whole industry buys this thing in the future on a percentage basis?

Tobias, you are a long-term analyst, you know the industry very well. I really like your 2 questions. Let me answer and then Dennis chip in. I think how we went about this was -- I can say this, this was not a transaction that came to us through an iBank or something else. This was a cold call from, let's say, the closest circle of the management board, if I may say so, to proactively drive this deal. We've negotiated for a couple of months, and here we are. So this was a very proactive move from HeidelbergCement. And why I think disclosed this earlier -- through our -- I know many of you thought, okay, they said last September, they are now working a little bit on digital, okay? They've introduced Microsoft 365 and then they get going. Guys, we've been going under the radar for 3 to 4 years, under my leadership, in my old role, and I knew then, together with Dennis about the potential, also the ability to get customer traction with great products in the industry. Everybody thinks this is an ancient industry that's maybe true to some extent, but don't underestimate our customer base. There are quite some customers out there with pretty digital study, especially next generation of contractors and everything, they really look for this. In fact, they only go into this industry if you can offer something like this. So that was a little bit the first part of the genesis. And when we saw the power of this, we said, "Guys, why don't we make an industry-changing step-up in order to leverage our know-how, also for the benefit of the largest industry transformation," and that brings me to your second question. which is, again, a very smart assumption. I do not push back on what you have proposed. And that's why it's so important that in the end, this part of the digitalization, so not our own digitalization treasury, but this part of the digitalization in the end, drive also value for the customers of Command Alkon, whoever they are. That's our -- that may not maybe a little bit counterintuitive to the IP mindset that I said earlier. If you want -- we are of the strong conviction, if you want to make an industry changing attempt and build a operating system for the industry, then you can only do this if this adds value for everybody who participates in that platform. And that's basically the idea. And we get a double whammy because we are an equity holder, that's it, but it's not trying to squeeze everybody or anybody outside of great customer value down the road. It's rather the opposite.

Okay. And maybe a follow-up question, if I may, given that the last one. I remember Bravo solution, which was part of Italcementi is sort of sat on the balance sheet forever. And nobody really gave any sort of major credence to it. How will you avoid that? How will you try to sort of highlight that. Obviously, you're talking about the valuation of $1.7 billion. That's a good starting point. But how are you going to continue doing that in the future?

Yes. Maybe just -- I think it's very important that you asked that question because I think Dennis should jump in because he knows a little bit also the Bravo solution set up. For me, this is -- yes, if you have a common denominator, maybe IT is the common denominator. But that's it between the two. They all have worked something in the IT space. But sorry, Bravo Solution was an outsourced IT department, old-style IT department that was also trying to look for third-party customers. And that was the setup of Bravo Solutions. This has nothing to do with the Command Alkon setup. This is a completely different ball game. They have a stand-alone business. We have a very, very small business with them. We know all their products from our own usage, but it's completely different setup. The one has nothing to do with the other, but it's great that you asked that question, but Dennis, maybe you jump in.

It's a completely different topic. Bravo Solutions was a software provider predominantly to Italcementi itself for internal process management. It had nothing to do with the customer side of things. Despite that, it was in the meantime felt for quite a lot of money actually to a big company now using that solution and integrating it into their offering. You might want to Google it. So it's not sitting on their balance sheet anymore. And even that asset, which was not as fascinating as Command Alkon in the end found a good owner.

That's a good ending. Thank you very much for your questions. The next call will be on November 4. Dominik, if you want to...

No, I think it's -- I think thank you for jumping on the call. And I do assume that this is not the last call around this topic. We continue to help you to understand what we are up to. Trust us, this is a game changer for us at HeidelbergCement. That's why we take the time today. And we'll also continue to take our analysts and especially also our investors and customers along on that journey. So thanks for joining.

Thank you. Goodbye.

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