secunet Security Networks Aktiengesellschaft (YSN.DE) Earnings Call Transcript & Summary

Good day, and a warm welcome to today's earnings call of the secunet Security Networks AG following the preliminary figures for 2025. I warmly welcome the CEO, Marc-Julian Siewert; and CFO, Jessica Nospers, who will guide you through the presentation shortly. [Operator Instructions] Having said this, I'm handing over to you, Mr. Siewert.

Thank you very much. And it's a great pleasure to see you all this morning, to have you all this morning. Today, we are reporting the preliminary figures for the fiscal year 2025. And we have great news because in a very complex market environment, 2025, secunet was able to really show what it's capable of in all the different verticals, scaling up and delivering to the market what was needed. We were really a strong partner to our customers in these very special fields that we serve, which were really going through complex dynamics in last year, looking at the geopolitical situation. Today, it's a great day reporting the preliminary figures. We will also give some guidance for 2026 and obviously look forward to your questions and inputs following the presentation. The market remains -- as an introduction, very briefly, the market remains driven by a lot of geopolitical developments and tensions. The pressure is high, very fast moving and cybersecurity is ever more important to sustain ever more sophisticated cyber attacks to really always be ahead of the wave. And it's our job to help our customers to always be ahead of the wave. The sovereignty discussion has picked up substantially throughout 2025 and is expected to continue through 2026, considering the developments between the United States and other countries. So there's a big debate going on about sovereignty in Europe, which secunet gives a very proper answer to -- with the only today certified cloud environment that is really 100% certified and sovereign from a German perspective and obviously also pushing into the European Union, the EU Commission and into NATO. Obviously, there's a very strong dynamic in the Defence&Space segment. We have the NATO 5% target, which is one target that we try to directly address in the years to come. And there's also the German EUR 500 billion infrastructure fund for the future that will be spent on physical but also on partially digital investments. We also remember from last year that the German Bundeshaushalt was extremely late, which again had an impact on the seasonality of our order incomes and also sales. However, we have seen the performance of secunet to really pick up even after the Bundeshaushalt was only approved in October. So a very strong November and December. But let's dive into what is really exciting, the preliminary figures. And you see the highlights of 2025, underlining very substantial, very sustainable growth of more than 13% in sales, reaching EUR 458.8 million, far above still the plan, and we were able to really scale up and ramp up supply chains, manage our people to deliver up to this much higher -- much increased standard with a lot of this being in November and December. So operationally, a very good performance from the team, which we greatly appreciate. Also, the order intake was quite substantial, which helps us for a baseline for this year to further create the foundation for our growth trajectory and the transformation of certain business models, moving more from a hardware to as-a-service and recurring revenue models. We see the EBIT at almost EUR 52 million, EUR 51.7 million, up by 22% and an order intake of EUR 532 million, up by 26%. And with this, I would like to hand over to my colleague, Jessica, and she will give some more deeper look into the financial figures.

Thank you, Julian. Also a very warm welcome from my side to everybody. Let me now take you through our main financial figures by starting with the group revenue. As you can see, revenue increased considerably by 13% year-over-year. While an unusually strong start in the year in Q1 certainly supported this positive development, the main booster came in Q4 following the usual seasonality pattern, which is still intact. As I pointed out in the last earnings call, orders were picking up in October and not only contributed to this favorable development, but will also give us some tailwinds for the new year, but we'll come to that in a second. The public sector grew 11% year-over-year with the division being certainly -- with the Defence division being certainly one of the major growth drivers, accounting for roughly 1/3 of total revenue. But we are also very happy with the growth taking place in our Homeland Security division and the business sector. The latter was certainly driven by sales to enterprises that were processing classified information, security cleared industry. As pointed out in our earnings call for the 9 months figures, the Public Authorities division was facing some headwinds last year, but normalized again in Q4. Exactly. So the momentum of the business sector was around 27%. That is something that I missed to say, but certainly on a lower level compared to the Public segment. Now I go on to the operating result. We are very happy with the development of our EBIT, of course, particularly as EBIT growth is exceeding sales growth very clearly. This is also true for EBITDA, which grew by 24% year-over-year. As a result, both margins increased and ended up at the upper end of our guided corridor. As usual, we make most of our profit in Q4, predominantly reflecting the seasonality of the business with -- paired with fixed cost [ degression ]. Coming to order intake. Order intake took a huge step forward and increased considerably by 26%, not only fueling year-end sales, but also supporting an increased order backlog, which again supports our growth ambition. The seasonality of the business is certainly also reflected in order intake. If we take a closer look at Q4, you see an increase of 72%, which in turn translates into an order intake of EUR 218 million. Besides the usual seasonality pattern, this also includes one major order we received in December. So as mentioned before, a strong order intake positively impacted order backlog, which is up by 36%. So you can see it here on the slide. This shows our very healthy market position and also will support our growth ambition for 2026. And with that, I will hand over back to Julian for further remarks on guidance.

Great. Thank you so much. And finally, it's really -- let me see -- sorry.

Sorry, I was [indiscernible].

Yes. Let's look at the guidance, and let's take a look at 2026, which is obviously always the most exciting to look into the future. And we are building the foundation to continue this growth momentum that secunet has seen in recent years. We have made a few minor adjustments to the key figures compared to previous years, which I would like to draw your attention to. And as you can see, we have decided to keep the key parameters of revenue, EBIT and EBITDA, which have been our driving parameters and key performance indicators since last year. However, we have decided last year as well to put more emphasis on our margin development. In the end, this is what drives our -- on the one hand, competitiveness in the market. On the other hand is really the KPI that we can steer every day in our everyday decisions. And while this is very important and remaining a key KPI for us, we have decided to give -- to change our guidance into giving a range of absolute figures, which is then completely touchable. We have also decided to do this already today with our preliminary figures different than in recent years. So the guidance for 2026 will be in terms of revenue between EUR 460 million and EUR 500 million, EBITDA of EUR 76 million to a range of EUR 84 million and an EBIT of EUR 53 million to EUR 58 million. You can see on the left side, the direct comparison to the preliminary figures of 2025. I think this will also give a lot more transparency to the market and to -- we are also reacting to the various questions that you have raised in the previous earnings calls and in our exchanges. So let's keep this for a moment. And I think then we can move into the Q&A session. Looking forward to your questions.

[Operator Instructions] I just gave you the permission to talk. Mr. Cohrs, you should be able to speak now.

I hope you can hear me well. Well, I have a couple of questions. I will mention them in a row. First of all, you've had strong order intake and sales in Q4. What does this mean in terms of working capital and flow? You had a working capital buildup, if I'm not mistaken, in the first 9 months. So I would assume that there was some sort of working capital relief in Q4 and maybe very high order intake was this also linked to maybe some prepayments. So maybe you can shed some light on the cash flow trends you've had so far? Secondly, I highly welcome that you provided already with an outlook. And I think also mentioning ranges makes a lot of sense. But could you maybe shed some light on the key assumptions for the very low end of the guidance, which actually assumes a stagnation, which is a bit belief in terms of all the megatrends you mentioned at the beginning of your presentation and the very strong order intake we have seen lately. And lastly, you mentioned the demand drivers. Here some questions lately, there have been additional funds for space and satellite programs, which will, in the end, also mean that there must be on the ground dealing with the information. So is this a driver for future demand? Also, there are big digitization programs for the land forces in Germany. So this is also something which will increase demand for your business. And we have a digitization ministry finally in place in Germany. There are announcements that many changes in digital solutions will come up for German citizens starting next year. So is this also a potential source of new orders and sales prospects?

Sorry, I was muted. Thanks a lot. I think there were a lot of questions. So I will jump right into the questions of cash flow and working capital. Both showed a very favorable development. We had a cash -- free cash flow well above EUR 50 million and also a big release on working capital, which is between EUR 20 million and EUR 30 million, depending on how you calculate it. So our calculation -- in accordance with our calculations, it is a bit above EUR 20 million. So we had a big release coming from -- certainly from inventory to a fair amount. So that is kind of reflecting our typical seasonal pattern. So we have -- we start into the year with, let's say, a regular or good level of inventory, then this inventory decreases and then we start to increase inventory around summer. Certainly, this time, it was a bit special because due to the fact that the Bundeshaushalt was approved quite late, we build up inventory a bit more than we usually would considering the same order intake. Could you please also -- I think you -- can you please give me a short notes what were your other questions about?

Cash flow -- you answered everything. Yes, you answered everything. Just one additional one. I asked whether you've received prepayments. You have had very strong order intake. And is this also related to prepayments? I know in the defense industry, often this is -- yes, this is linked to any prepayments.

No, we do not receive prepayments. Not substantial at least.

Yes. I think the second question was around the lower end range of the guidance. And this is really a range that we are providing to the market where the lower end is built on basically backlog and supply chain as is and obviously, the projects we see for this year, where the upper range is built on additional potential with ramp-up of supply chains, ramp-up of production. We have to, I think, keep in mind that as of today, the supply chain is quite stressed in many areas. We are seeing also -- yes, we have quite a long supply chain, let's put it this way [indiscernible] on this, and that's why we are providing a range. Thank you also for the additional questions around the funds for space and satellite, which is an extremely interesting field of business for us and perfectly put, whatever comes from space has to be processed on ground in a very secure way and in lifetime, especially when we think about any kind of defense use cases. And what we can say about this is that we are very close to this market vertical and that we are monitoring and obviously positioning while the actual orders or real business deals haven't been signed yet, we see potential in this field. And this will also flow into our strategy process that we are starting in February for the next cycle in order to capture parts of this market. Whether it's relevant for 2026 remains to be seen. The fourth question around digital solutions for German citizens, I think, is quite crucial. And the company with all its verticals, especially in the cloud area and through -- where we have to understand the cloud business as an overlay or as basically impacting all our business fields, where one of the first ones might be parts of digitalization of German government and solutions for German citizens. It's the same thing. We have a number of proof-of-concept projects and MVPs, and we are looking forward to transforming these into real business. I would say it's progressed where the market is currently forming. I hope that answers your question.

And the next question is coming from Andreas Wolf.

Can you hear me? First of all, congratulations on a strong Q4 and financial year '25. My first question is related to your business sector. What is the current demand for entry and exit systems for international exports? Could you provide an update? You had a strong business in Q3 last year. How is this business field proceeding? And then on the orders that you secured in Q4 and that are reflected in the order backlog, over which period of time will those be reflected in revenues? And then regarding the EUR 500 billion fund, are you already seeing projects coming up this year? And when will the associated revenues materialize? And my final question, the fourth one is related to chip capacity shortages in the production, which apparently lead to higher hardware prices. How is this influencing your business top and bottom line development?

Thank for your questions. When it comes to Homeland Security order intake, we are very happy with it. It shows also a good growth in this year. It is part of the Public segment, though. Just I wanted to add that the entry exit systems because it's always Public Authorities requesting them and also being responsible for them. When it comes to the order backlog, the majority of our order backlog is usually for -- order intake is for the current year. And when I look into the ratio of order backlog at the beginning of the year, around 75% for the current year with the remaining 25% having usage for more than a year. So -- and the last question was, sorry?