Serviceware SE (SJJ) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the earnings call of Serviceware SE regarding the preliminary figures of the financial year 2024 and 2025. I would like to welcome the company's CFO, Harald Popp, who will guide you through the results in a moment. Followed by a Q&A session, where we would be happy to take your questions via chat. And with that, I already hand over to you, Mr. Popp.

So thank you very much for the introduction, and welcome, everybody. Good afternoon and good morning to you for those of you who are at the U.S. or at the time a little bit ahead of us or yes, and the ones who are in Europe. So thank you very much for spending the time and the interest in Serviceware. We will talk about the figures of the last year today and also give some outlook for the next year. And we have put a little bit excursus in the slides today because you might have seen that, yes, software companies are a little bit under pressure because of artificial intelligence. I will elaborate a little bit on that because I think it's important. And I think there's some -- hopefully some news for you, which makes you more confident, especially in the stock of Serviceware. As it's announced here, we will discuss the preliminary numbers. The final ones will be published at the 27th of March, yes, 2026. But there will be -- I do not expect very material changes from today's figures. So therefore, I mean, we can talk about the things today, and there will be -- I do not expect any changes or material changes for the final figures. Yes, we don't want to go or we will not go into much the equity story, as I know that you are all very deep into the equity story. I will more elaborate on the figures and the plan for next year. But there might be some points where I do have to explain some more things. So then I will go into our business model more deeply. I will talk about, hopefully, not more than 30 minutes. This morning, we had a German call. It took about 35 minutes, and then you have the rest of the hour to place the questions via the chat as introduced. And this morning, we were very proud having a record participant rate, which really doubled from last year. So the interest in Serviceware is going up. And hopefully, this will -- somehow will be reflected in the enterprise value the following weeks, days and months. So thank you very much. We go directly into the presentation. You might know this slide, and it's very important that we always remind us what Serviceware is doing. Service enables people to achieve their ambitions in the service economy. And why I always repeat this is because of the addition revolutionized by AI. You all know that in the early 2023, the public release of ChatGPT disrupted our industry and modified, of course, our vision because everything we do today is with AI, and it helps a lot and to take it in advance, we do think that we are well prepared, and we do think that we will profited from AI. So our software gets even is our expectation, more available with AI. I will elaborate on that further on. And we will see the following slides how this has impacted our work at Serviceware because, I mean, AI is a disruption and you have to distinguish is it -- do companies profited or not profited from. And I think we at Serviceware, we will profit from the artificial intelligence disruption. Yes, what was the last year the last year before we discuss the KPI figures, we believe it's important to identify the main drivers of our ESM business and explain how these drivers make us optimistic for the coming fiscal year. First, we did grow in a double-digit way, turning the EUR 113 million. It was in the upper 1/3 of the guidance. We increased significantly our EBIT and EBITDA. And since the IPO, it was the first year with a positive EBIT. And if we go down further the line, it's even more than the EBIT. And I come to some influences of this later on but I think this is a very positive thing that we not only grew but turning into black numbers again, which we expect going to see going forward. Then, of course, we strengthened the international footprint but to take it in advance, you might see that the figures for internationalization did not reflect it fully in the P&L account but we did win important customers in Asia, in the U.S., even also the U.S. customer is about to update and cross-gradate this installation. So therefore, we expect more international revenue this year. And of course, we expand our reach in the Italian market. And also, this is something for the future. We do expect from the, yes, circumstances we see right now, yes, the politics helps us not in the U.S., of course, not because they are the strength mandate by American but it helps us in the rest of the world, where a lot of CIOs, I spoke in the last weeks internationally and nationally think about how can they decoupling from American software. These thoughts are this discussion going on in the enterprises, and I think it will help us in the future. And of course, our AI-first execution, which we went to the market on the 1st December 2024, helps us because we have now an AI native core of the service platform. We won a lot of customers there with our new AI process engine released again in 1st December 2024. So we have it on the market now for nearly 15 months. And what helps also a lot, and this is a result of our thoughts since back -- since 2019, we get a recognition from Forrester Wave and where the strong performer and one of the less European software companies, we were in this wave and I think this is also combined with this political thing going on right now in the world. It helps us a lot that customers and also partners worldwide were seen that the Serviceware is offering solution that will help their business. And therefore, we are very optimistic that will help us to go forward and not only strengthens our international footprint but also bringing it to growth and revenue growth. So I have to -- okay. Then we're coming to our performance to the key indicator figures. But before we come to this, we see the figures here. We grew by 11.7%, as I said, the upper quarter. Then we -- since 2 years, we published our service revenue beside the SaaS revenue. The line, as you know, the last 7 years is the service SaaS revenue line. This increased nearly 30% from last year. But if you look into deeper the 2 lines, then it's separated by nearly EUR 77 million of SaaS revenue and only nearly EUR 13 million in service revenue. And you could see that the service net revenue went down again another time since 2022. It's going down repeatedly every year. That is due to the business -- the last business, the SaaS revenue we do. We do not need so much service anymore, and that is also our expectation that we do not go to 0 with the service revenue, not at all. But of course, it will go further down. And therefore, the SaaS growth you see here was the last year, 36%, which was also a record high number in terms of relative growth. And coming to the contract liabilities, you will see that there is more to expect in the following years. When we look to the EBITDA and EBIT line, then we have to keep 2 things in mind, which are very important because last year, the fiscal year 2020 -- year after last -- before last year, the fiscal year '22 -- '23, '24 was supported in the EBIT line by EUR 1.7 million capitalization of R&D costs. This is a must you have to do if you develop software, which is not on the market. And this year, we developed the AI process engine, but did not sell it or did not offer it on the market. So we had to capitalize our R&D cost for that part, what we usually do not do. Other software vendors are doing it. We don't do it. We rather put it in the cost. But this means that this number, EUR 3.2 million the year -- or not the last year, the fiscal year '22 through '24, was EUR 1.7 million higher -- lower compared to this year, the EUR 5 million of EBITDA. So you have to compare the EUR 5 million to nearly EUR 1.5 million in the year before because the EUR 3.2 million was supported by [ 1.7 ] capitalization of R&D cost. So that makes the growth even better concerning this 57.8% growth. This was really significantly. And when it comes to the EBIT line, we have the contradictional effect this year because, of course, if you put something to the balance sheet in the following years, you have to depreciate it year after year, and that happened the first time this year. So the EUR 980,000 in EBIT means that around EUR 800,000 were deducted before. So if we don't look to this effect we did the past years because we had to -- because the rule by IFRS, the figure would be much higher this year, the EBIT, EUR 700,000 or EUR 800,000. So in all, that means that our EBIT would have been additional EUR 2.5 million higher than the previous year if we wouldn't have done the capitalization of R&D costs. We will not do it in the future if we don't have to. But now we can compare the figures in the future very good, and that is to be expected that we do another better step towards software profitability this year. You see that the ratio of recurring revenues went up to 82%. I think it's not the end. It will be, in my impression, goes over 90%, we can say because we still have a lot of onetime revenues concerning services but also licenses. And therefore, this recurring revenue will increase but also increased last year from 78% to 80.3%. And the operating cash flow went down a little bit due to some prefinancing deals. But in that time, we also secured the bigger chunks because to avoid some cash losing when companies go bankruptcy. We have a very strict reputation, how to say, reputation check before we do bigger deals with customers. But of course, you never know what the future brings. And especially in our core market, Germany, you see that the circumstances for making business are not the best right now. We're getting better, I think, but we have to watch at the fact that we look that our customers do not go out of business. And therefore, we are very conservative in this matter. And if the chunk is higher, we finance, then, of course, we make insurance that we get the money back if there is some yes, going out of business of our customers. The second side of our KPI is that the cash increased a little bit due to the same fact I explained the slide before. The equity rises again. I think it's also the first time after a long time that our equity is rising again. Of course, the equity ratio went down due to the fact that the balance sheet total went up by 10%, 10.2%. And that is due to the fact that the contract liabilities you see went up another time in a row by 21% -- nearly 21% to nearly EUR 100. And I do expect that this will going up this actual year again. Then you will see that we have put some cash to the side in government bonds and really secure assets to try to have also a conservative cash policy to not lose any cash because we might need it for future activities like a cash buyback -- no, not cash buyback, share buyback or some acquisitions. I come to that later on, especially the acquisitions because it's a window of opportunity right now, but I will come to that when we talk about opportunities concerning artificial intelligence. Here, you see again the numbers. We have still a very strong SaaS momentum with a growth of 36.1%. The dynamic of the growth of contracted liabilities slowed down last year. Yes, you can see it if you look at the figures. But you also have always to take in account, which is the duration of a contractual liability. And it was -- it's getting more dynamic, I think, in the future again, and we saw the same effect in the past, 2020, '21 was a little bit slower growth and then it went up. And it is nothing -- it's one effect, of course, is the migration to SaaS but also what kind of business you do today and put it to the profit and loss account and that you will see the first quarter short of a lot of activity, which unfortunately will not appear in the first quarter in the profit and loss account or in the revenues but will appear in the contracted liabilities. So therefore, I'm pretty sure, confident, not sure, I'm confident that we will accelerate this growth again. But also the duration went down. That means how long will this contractility fill up or last in the profit and loss account and that shortens. So the higher -- the relative higher share of the EUR 97 million will appear this year in the profit and loss account. And the last year, it was less. So therefore, this is a good sustainability of revenue and a good forecast for our -- this year's revenue forecast. Here, the left chart, you see how the lines develop. Keep in mind that the strongest line, SaaS and services is divided. I showed already the figures but it's still overall a 23% SaaS services CAGR. So this year was over this average CAGR. So I think we will see it, of course, also in the future. And what you also see, and that is something I have to focus on, not because it's very nice to better understand our guidance for the next year. You see that there was EUR 6 million nearly, which the licenses went down. If we also take some other onetime revenues, then it sums up really at EUR 10 million and EUR 10 million less in revenues has to be replaced by recurring revenue. And as recurring revenue is not acquired today and released in the profit and loss account today, that means that there could be some unlikely event that our revenue next year does not grow with 20%. But I will come to this on this later on but I will just highlight this to keep in mind when we come to the guidance for the next year. The middle chart shows that our main cost driver remains stable, where revenue is growing that comes by leveraging SI internally and putting work to our artificial colleagues, which supported us doing the work. Compared to last year, we are 28 natural persons less but we are 3 artificial colleagues more. And I expect this trend going forward, not that we lose so much human employees but that we raise a lot of artificial persons who work for us. And we integrated some, as I said, some new AI colleagues in the back office and of course, in the R&D, R&D department is working with artificial intelligence really since 2023 or before. But what is new now that you really can get -- put the work from a natural person to AI person. For example, we have one person called Friedlein. He is in charge of reading contracts and putting red flags to our contracts, though what we learn. He costs EUR 35 a month, so EUR 400 a month (sic) [ EUR 400 a year ], the average salary is about nearly EUR 100,000 a year for human colleague. So therefore, you could see that there's a lot of efficiency lying ahead of us when it comes to the cost. That does not mean that we see next year EUR 30 million in HR cost. But the biggest cost driver, we are happy in raising our revenue. But meanwhile, we keep the HR cost stable. And with AI, this is one effect on the cost side, we can keep that stable and also can do more because with less money, we can do the same output or even more output. And this is very important to keep in mind. So you might sense that there's a big cost efficiency potential ahead of us if we leverage AI consequently. And that is our main job in managing the company that we keep this AI disruption aware and that everybody knows either he uses AI or he's getting out of business because AI will stay. It will not go away, and we better adopt it very early than too late. And therefore, we also bought some -- a bunch of AI agents, which we now step-by-step will harvest. And my personal opinion is that in 2 to 3 years, we had a lot more artificial colleagues doing the work and that will be steered and controlled by human beings. And also that means that human beings need more -- another qualification to do so. So employees who will not adopt this will have difficulties in the future. And the chart on the right side is a result of that. If you raise the revenues and keep the cost stable, then of course, you will do a better EBIT or EBITDA in the future. So here are some other KPIs. And if I turn your eyes on the left-hand chart, then you see that there is a recurring revenue growth, and it's stronger that overall growth means that the same reliable recurring revenue is growing. And this is, of course, good for the future. More security resilient business model, of course, and that is very important. If that grows, you know that our forecast and our stability in revenue for the future is very good, especially if you combine it with our churn rate, which is still very low. Of course, the little upgoing trend from 3.1% to now 3.5% is due to this migration we went through going from non-AI architectural software to an AI native software. And I come to this point, this very, very important point later on. In the middle chart, you see how the international or non-German revenues develop. And to be honest, I'm not very satisfied or I'm -- yes, it's not good what we see here because the revenue turned down. And as I said, not only today but all the time, our destiny and our success lies in the international business because it's more profitable. And of course, it gives us more strength. So the good answer is that we see a bigger closed contract rate in 2025. So the base from where we are is better. We see some churn in Switzerland, and that is the main reason why we turned the figure down. But when we look to international business going forward in the rest of the world, not Europe but in Asia and the U.S., we will see that there was a growth and there will be a growth further on. And also the cash increased again due to the operating cash flow, which was increased. We now have no bank loans anymore. So we do think that we can do better also in the future. This is what the analysts think about us. So the price target was actualized by Montega on February 10. and you see it's EUR 25 and also Quirin has a good stable growing price target. And that means, from a personal opinion, it's a good frame window right now or window of opportunity. If you get more shares or if you want to step in service where, then I think it's a good opportunity because over time, the -- how to say, the attitude in how AI will react with software companies will differentiate. And there will be software companies that really suffer from the AI disruption, and there will be software companies who really profitating from. And then you separate these 2 companies and these companies who will profit it from will be still having a good business model with good margins. So at minimum upside now when you're concerning these analyst quotes or relying on that, it's more than 70%. I think it's a good opportunity. And you also see that Dirk Martin and me did not change any of our shares. We are still at 31.4% each, which gives the company a stable background to go to the future. So before we come to the outlook, I want to elaborate, as I said, a little bit about this debate going on, is AI destructing or really bring down business model of software companies. To say it in advance, I don't think so at all because there are 2 layers we have to differentiate. If we have the business software, then we talk about the infrastructure layer of a company's value creation. And this will not disappear, and it will not disappear if AI getting stronger because AI is an intelligence layer intertwined with the infrastructure. So infrastructure doesn't appear when intelligence improve. It becomes more critical. And here, we come to the point that AI, if you use it without a software, becomes a little bit risky if it comes to governance, to data integrity, to trust, reliability. This is something which is more important than ever when we talk about software and AI. Of course, you see these articles about OpenClaw or some agents which do everything on its own. They write software, they use the software and so on and so forth. But you have to give the data, the keywords, the credentials, you have to give them data. If not, they take some data, which is not sure, they hallucinate. So there's a lot of risk leaving AI on its own, but implementing it in your software leverage the software. And that's what we did with our AI process engine. And that is why enterprise software remains essential to the value creation. It will not disappear. So the debate is traditional software versus AI native software. While we think that traditional software, if they do not change, will suffer over time, also the business model, we do think that AI native software as AI process engine will profited from the AI disruption. And AI versus software is not the right debate we see so far. And therefore, we are very confident and optimistic about our business model. And if we come to this debate, then AI agents are integral players in business operations. As I said, we use them today as colleagues. We use them today in steering our software. We use them today in developing our software. That is all true. But they're integral players. And only if you integrate them in your business operations, they give you the value. Otherwise, they give you a value, but with a very high risk and you are not aware of the result. For example, if you do not have a certified database, which you send the AI agents on, then you get in trouble. And also traditional software was built for human users, not for controlling and being used by AI agents. So it's vice versa. With our software, AI agents can work with our software, and we use AI agents to leverage our software. So it's both directions. It is only possible if you have the right architecture. And as, for example, Mr. Andreessen and the Silicon Valley said, he's a very good investor. He invented Netscape and he knows what's going on. He said, you have to do AI first version of nearly everything, especially software. And that's what we did since 2023. So we did this step. Traditional software manufacturers are sometimes about to do this step. And I can tell you, as you could see the last 3, 2 years, it's very heavy and painful because, of course, you have to deal with the customers, you have to deal with the technologies. But today, we have on the market AI native software. And AI agent will maximize the output of the AI native software like the alternative service platform, hence, drive demand for the platform. So we do think that AI will drive the demand for our software. And as I said, you might remember that last summer, a big software company, an American software company led off 5,000 people in the support department. We all know that they did not do it because the work were getting less or they have some problems in the profit and loss account. They did it because they could do the work with AI but not AI alone. For example, they do need a software like ours that they can leverage the AI agent and that AI agents are doing the job with our software and not alone or just the software with human beings. So that is a mixed setup for the future where we are, we do think are well prepared for it. So we think that AI is accelerator and a margin differentiator for Serviceware. Why do we think this? It's a trusted platform for AI adoption, more as more AI agents are deployed, and I'm pretty sure we will see this development that AI agents are taking over the work of human beings, but they are controlled by human beings and you have to take care about governance, trust, reliability, data protection, compliance. And that is not provided by AI. And therefore, you need software, which is leveraging this AI and only software with AI native architecture can handle this job. So again, software companies who are not turning into this AI age will suffer, we do think. But companies who do the painful step to do everything from scratch in an AI architecture will profit from the AI development and the disruption. And also, I know I had a lot of talks to investors in the last weeks. And they do think, well, the time of the very profitable business model is over. They do think that the margin we saw in the past will not appear in the future. So I do think we are on a very low profitable margin. So I think there's a lot of potential but this is not my reasoning. My reasoning is different. AI will lower cost, as I showed, for development of software for service delivery and for internal processes. But -- and that was a 20 -- last 25 years, always the same software pricing was not determined by customer value -- it was determined by customer value and not by cost structure. And that is very important to keep in mind if we talk about business model of software, you have to have a modern architecture and then you can price your software about the value the customer gets. And that is more important than looking who is working with the software. And the future for us is the AI native platform. We expect revenue and margin growth while some of our customers and not our prospect customers will suffer because with their current provider, they were facing some legacy vendors not delivering the AI format and additional monetization of AI through value-based pricing. I think there's also one important fact we turned the value-based pricing on last autumn. We reported about in the press release in January. And I think it's important now that even if people are less natural human beings are working with software, you can also get a better price because you get your pricing from the value of the software and not by seed or by a budget. And we did this with the first customer last year. And in our pipeline, there are more customers who will adopt this value-based pricing because it shows that the risk for the customer is less, and we can calculate this risk and hopefully get more revenues in the future for that. And increasing the revenue potential through demand for controlled use of AI agents and also this window opportunity I announced is there that a lot of software vendors do not have the power to do this step into the AI age. They cannot build. They are not able to build their software from scratch again with the same functionality because it's cost, it's customer handling, so many things you have to deal with, and it's a painful valley and not everybody has the power. And then the opportunity for us is with having cash on our side, looking especially international markets where we can harvest, for example, software vendors, not for the technology buy but for a sales channel buy that we see some customers who ask their vendor questions in 1 or 2 years, how they can participate in the AI age because today, our customers want to do AI. But mostly, they do not know how they approach this thing because it's so complex. And with the AI native platform, they can really easily leverage AI in their service management. And this is also something which makes us confident and optimistic. So what are the growth driver for the year this year? Contract liabilities as last year as well, a lot of this EUR 100 million contract liabilities, nearly 70%, I think, will be released this year. The ratio last year was 60%, something like this. Then of course, we have AI native value creation. AI agent will drive the value creation with AI native software and so the demand for the Serviceware platform. And of course, we do better in the internationalization, but we see some footsteps, as I already reported, not only with our pipeline but also the Forrester Wave report initiated a lot of inquiries all over the world. And also, we do think the trouble or the -- how to say, the resistance we see in the U.S. because of the politics by American, and we lost some deals last year because of the politics. Our customers, when we met them after decision, told us we were the better solution but they were pressured to do -- to decide for the American solution. And this vice versa comes in the rest of the world that I see CIOs discussing the decoupling of American software and talking about alternatives outside the U.S. And that gives us also some backwind. And of course, you might have seen it in Instagram or some other social media. We do some service rebranding and we do some performance marketing. You will see a lot more communication over social media because we -- from October last year, we have a new marketing leader who is really in the case and really put us in social media to the next level because it's important. It's not the trade for anymore. Of course, it's also for physical meetings important but more important, we will get the social media. So with these growth drivers, we come to a guidance, which will -- is similar to the last year, 5% to 15%. And of course, to take in advance the question about this, I do expect personally that we will end up between 10% to 15% rather than to 5% to 10%. But as I said before, the onetime revenues are still at a level where we can lose more than EUR 10 million in a year. And then you first have to compensate this EUR 10 million and then additionally, you have to grow. And looking to our contractual liabilities, there is a possibility. And if everything goes the right way, we will definitely grow over 10%. But what we have to avoid is really bad messages concerning adoption of guidance in the market -- in the market this year because our share is kind of illiquid. And if we do bad messages in capital market communication, that will hurt us a lot. And therefore, we are on the very conservative side with this guidance. But what we raised compared to last year's guidance is that we do not improve our EBIT and EBITDA and EBIT. We will significantly improve it because we can see, as I said, elaborated on that the cost base is constantly constant and the revenue is going up. So therefore, in a good case, we make over EUR 130 million this year. In a bad case, we are about EUR 120 million -- more than EUR 120 million coming from EUR 115 million. So my expectation is that we go between 10% and 15%. But to try to avoid to adopt the guidance in a very -- an unlikely event, we took this 5% with us. And you have seen how it worked on the last 2 years. We always adopted our guidance or strengthens our guidance by the second half of the year. And I expect this to do so this year. But this is my personal opinion. This is the official guidance we work on this year, and I'm pretty sure that we can deliver this guidance for this year. So I overstretched a little bit the time. I'm sorry for that but it really happens that English is not my mother tongue and therefore, something I have to say in more words than do it in English. I'm sorry for that. But we still have 20 minutes time for your question and answers. And thank you very much so far for your attendance and your time you spent with Serviceware. And therefore, I will want to give back to the moderator. Thank you very much for your interest.

[Operator Instructions] And with that said, we already received a question by [ Mr. Kapow. ] He says congratulations on the record results. You talk about the capital allocation policy going forward. How will the cash generation be used for organic growth? Are you hiring more salespeople for international push, dividend M&A or share buybacks?

Okay. So all of you have listed our opportunities. As you might have mentioned last year in May, we did some changes to our company documentation. I cannot say it in English but that means that we are not able to buy back shares, not only from the cash reason but also for the legal part, we can do since February, I think, '26. So in 3 days, we are able to announce a share buyback. That was not possible because you have to wait half a year after putting it to the register, and this was done in August last year. So we are now able to buy back shares, and we are also to pay a dividend. It's rather unlikely to pay dividends. If we do a share buyback, then we do a tender, so offering the shareholders to give back the shares to the company by a little uplift of the current share price. So this is something we discussed. And as time goes by, this discussion go more and more precise. M&A, a long time was no topic, but it becomes on our agenda, a higher priority. I already elaborated on that because we see in especially the foreign market also in Germany but Germany is not interesting for that kind of opportunity because we have a good standing, we have a good reputation. We get customers who are asking us and not vice versa. So -- but in the foreign markets, internationalization, the way to -- the go-to-market rather than rather buying, for example, a company with a product, which has not the power to do the next AI step, as I talked about. And therefore, their customers will ask for a solution, what will they do? And before they really go to the market and look anywhere else where they get a good solution, we think about looking to companies who do not have this power and want to have to sell theirselves. And then we are here to really go buy it not as a technology buy but as a go-to-market. And that is something which is on our list right now. And there might be a success this year but nothing very precise that I can say, well, we are in talks or something like this. But we found out that this strategy might help us to get a bigger footprint, especially more revenue and profit in the international side. Yes, we do hire salespeople. That is the only growth path. And of course, we do some international marketing activities to put some money there. But as I said, I do not expect that we put cash in that in terms of that we put more cash in it than rather getting cash back or cost back from using or leveraging AI internally. So I mean with the savings we do in using AI, and there's still a lot of potential, as I said, we today have 3 AI colleagues. I expect this more than 100 in a few years. So there's a lot of leverage or potential going up. And with the savings we do, I expect we can invest into marketing and sales activities internationally because, as I said, this is really a big issue we have to solve.

Thank you so much. [ Mr. Kapow ] has another question. Can you please also give your view on the competitive dynamics, especially on international push? Who are the competitors? And how does the product normally compare, especially with regards to AI native features? Can you specifically discuss view on why U.S. players like ServiceNow may be suffering with the share prices?

Yes. Well, it's difficult for me to tell you something about ServiceNow. I'm concentrated on Serviceware and like to see that Serviceware is going well and then we will have success in the future. But of course, there are some U.S. players who did not do the step to be AI native because it demands that they do their software from scratch. Of course, you can read from some of the U.S. competitors that they offer artificial intelligence features. But it's not about artificial intelligence features, it's about the architecture. In the German call today, I was questions, are you able that customers bring their own large language model with it? And yes, we can do because of our architecture. I'm doubting that with our U.S. competitors or other competitors who did not do the step in doing the AI first or AI architecture, native AI native architecture, if they can really offer their customers bring your own large language model because that is something customers will see, especially if you talk about big customers in the future, international customers say, well, I don't want to use ChatGPT. I want to use Perplexity or you name it. And therefore, don't -- can you do that? And if you say, no, we cannot do it because our architecture is not delivering, then of course, you struggle a little bit. And we can do it. And therefore, I'm optimistic that we can do it. The first part of your questions, we see, of course, a lot of dynamics, not knowing where they go to. But as I said, U.S. business has come some kind of hard right now because of politics surroundings. And we had really a good chance last year, a very, very big customer, and we lost it, not because of feature, not because we were European -- yes, of course, we were European. That was the case because they had to buy American. But this, as I said, will be vice versa lead to the point that the rest of the world is really thinking about what -- how can we decoupling because everybody is aware of the situation. What will happen if the U.S. not only raise tariffs but put another pressure point to the world is saying, well, we do not deliver our services anymore. I guess Microsoft and all these players are not -- don't like it. But of course, politics will do the politics and not companies. I don't think that it is very likely to do not misunderstand me. But the threat which comes with this opportunity really make people in the rest of the world think what kind of alternatives do we have? And if we appear in the Forrester Wave, then of course, we have the big win to be one of these players who are taking this business and also to be very clear and sure this decoupling does not take -- this is not something overnight. I had some talks to CIOs last week, as I said, and they do say, we do just the analysis. And the analysis shows that it will be a hard painful way to decouple. And therefore, it comes step by step but we can offer to be a competitor in that way. So hopefully, I got all this question answered. Who are the competitors? Yes, we do not see any -- right now, we don't know. There are competitors, of course, especially AI lead to the fact that there are new kid on the block. We did build up from scratch our software in 6 quarters. Anybody else can do it. So the new kid on the block are the main threat to our competitors' landscape but then there is another big advantage from -- for Serviceware. We do service management since 27 years now. So therefore, we know what we are doing. So it's much easier for us to build the software from scratch for any new kid on the block. But of course, that is a bigger threat than the bigger software vendors, which are now must do the next step to be AI native.

We have another question from [ Mr. Narri. ] Your order book grew EUR 25 million in 2024. In year '25, the growth slowed down to EUR 17 million. What is the main reason behind the slowdown? Do you see signs of uplift in '26?

I mean, I think it's a liquidity, I do think. Yes. This is a hard question for me to answer as I'm not an expert in capital markets. But of course, the EUR 25 million 2024 was, I think, one of the results because I think this is numbers or is it revenues? I don't know. But of course, the share price developed last year very good, of course. But people who are into the share, and I think there was a little bit of changing in equity investors, changing investors that started 2023. And of course, these investors are still like to be in the share because they think it's not all done yet, and therefore, they won't sell. But it's really, really hard for me to tell you if you -- if I see signs if that change. I was very surprised but of course, this was something, which happened to every software vendor that the share came down because the big threat was last autumn, and that was a time where we had still a higher level and it was at the beginning of the year. But our slowdown in the share price came, I think, in the beginning of February and was very surprised that we did it after all went already through the market. So therefore, I think with ongoing better revenues and better earnings, we will see, of course, in '26 an uplift, yes. But I'm really not an expert in this. So therefore, -- let's see. But I'm confident in our share price, and I think we are undervalued by far. And therefore, with that the market is seeing that and the interest is raising, as I said, we doubled the participant in the German call this morning and also in the English call this afternoon. We see a lot more people in the call than last year. So I do a lot of roadshows physically and nonphysically. So hopefully, we get the story better to the market. And then, of course, the order book will grow.

We have another question by [ Mr. Christoffersen. ] Can you explain in more detail why the contract liabilities were flat since Q1 and why you expect them to grow in full year '25, '26?

Yes. I mean that depends a little bit on the seasonal character of contract liabilities. I know in the middle of the year, it was 100, now it came back to 97. That is depending on the thing that the main invoices are at the December, January. So therefore, I expect the biggest growth in the contract liabilities in the first quarter because of what? Because the main invoices are now out. And therefore, it first, because it's recurring -- the invoices are for recurring revenue. And that is the reason why by the end of February, I'm pretty sure. I don't know the figure yet because we have 23rd of January -- February. But I'm pretty sure that this figure will grow and will grow tremendously. And then it really depends if we do bigger deals over the year that will grow again. But the dynamics is like this, that from February onwards, the natural power is that they go down on a higher level until end of November, end of December and then making a jump to the next level. So therefore, you have to compare the contractual liabilities always to a date, which was the same date last year, then you really see what happened over the year. And there, you see it was nearly over a little bit over 20%, and I expect this growth rate going further this year. We will definitely grow that I'm pretty sure, and you will see a big chunk in the first quarter. It will be the biggest chunk, I expect, but not sure. It depends on the big -- if we get in big deals, but the number of deals are also important with the higher ticket of recurring revenue, the higher the recurring revenue will grow.

We have another question by [ Mr. Hueske. ] He says, great job on maintaining the strong growth in Software as a Service. You alluded to expecting a reacceleration in contract liabilities from the 21% year-over-year growth level again. What data points are seeing that gives you confidence in this view? And how much is growth tremendously?

Well, we see this figure. So it's one part but it's a very weak argument. I come to the big argument by the end. Of course, it's experience. We always see every time that the contractual liabilities grew over time, sometimes with a higher gross margin, sometimes with less gross margin. And that is, as I said, a very important KPI here is the duration. So if you have a high duration, then, of course, you have a bigger contractual liability, absolutely. But it doesn't mean that the majority of this contractual liability goes into the profit and loss account. So if you lower, for example, the duration from 3 to 1 then it means that you have 1/3 in contracted liability but also means that you have the same amount coming into profit and loss account the following year. So what I mean, the duration has a lot of influence. And I saw this coming down over the years as companies are not willing to go into 5 years, 3 years contract. Of course, the main contract is -- the standard contract is 3 years from the beginning, but then it's returning 1 year after another. So this is something that gives me confidence on this view and also seeing what the pipeline is. And yes, but of course, if the duration right now is a very low level. And I always saw in the past that this low level is good for getting a better level. And if the duration is rising again, then, of course, without any new deal means that the contractual liabilities will grow only in the case of higher duration. And therefore, I'm confident that it will grow. And tremendously, yes, we saw 41%, 71% in the peak times, not far away. That could be, of course, a growth goal for the future, again, depending on the business and depending how many years the companies lock in but tremendously is more than significantly, so meaning 20%, 30% plus. I also do think that 20%, 30% is a tremendous growth. So as we are at the lowest point now with -- not lowest, that is wrong, we also had years where we grew by 5% and 4% in the contractual liabilities. So growing 20% plus in contractual liabilities is a tremendous growth in my point of view and 41% and 71% in the past year was somehow extraordinary. But if we can do the -- if we can hold on this growth, even if the duration is stable, then I think we are doing a good job helping to grow the revenues at the same ratio.

We have 2 more questions in our chat box. One is from Mr. Robertson. He asks, you mentioned paying artificial people EUR 400 a month. Who are you paying...

A year. EUR 35 a month. Sorry.

He asks, who are you paying this to?

Well, to -- in the moment to Microsoft, ChatGPT, our internal model, large language model is Microsoft. So therefore, we're paying it. And we had to buy a bulk. We have now a potential of 150 artificial people. We harvest about 40 to 50 but this is much too less. But the minimum bulk you can buy when you do need this functionality, we do have because we want to have a focus on and want to have an insight how our human people are working with artificial intelligence. And that is not possible if you only 3 -- if you buy 3 licenses. So therefore, we started with a minimum of 150 artificial intelligence people. I think over time, we will turn it into high usage. But we need the insight information to see who is using artificial intelligence and who's not.

Perfect. Our last question for today's call is from [ Mr. Narri ] again. Your license revenue decreased sharply. Are you expecting a similar decrease in year '26?

Yes. This is a tough question. I would have known the answer. I would more narrow the guidance or put it from EUR 5 million to EUR 15 million to EUR 10 million to EUR 20 million because I did not expect that high decrease. And the nature of license revenue is that the license revenue can come on the 30th November with EUR 2 million, EUR 5 million, and then you have EUR 5 million more revenue and nearly a high amount of margin. And I do not see this in the pipeline right now. I do see that there are still license revenues in the pipeline but less than last year. And if I deduct the same ratio from last year, then, of course, we could see a sharp decrease again. But at the end, the more you decrease, the more you give place for recurring revenues and for a more sustainable revenue model. So therefore, one day, you have no license or nearly no license revenue anymore or onetime revenue or a very low level, that doesn't matter. And reaching that point means you at a point where you have a sustainable revenue business model, which is very good in forecast terms. So it's hard to say but I do think, yes, we see a sharp decrease again. And saying that, I'm also sure -- or not sure but with this decrease, I also expect that we can turn 10% to 15% growth.

Perfect. Thank you so much. With no further questions in our chat box, we have come to the end of today's earnings call. Thank you very much for your interest in Serviceware SE. A big thank you also to you, Mr. Popp, for your presentation and your time.

Always a pleasure.

Should you have any further questions at a later time, please feel free to contact Investor Relations at Serviceware SE. I wish you all a successful remaining day and handing over to you, Mr. Popp, once again for your closing remarks.

Yes. Thank you very much. I really appreciate that you took the time for this call today. I do think we are in a very good position from now on to grow, to do better as our competitors because we are AI native now, and we do see customers adopting this, and we do see customers coming back. We do see customers coming from the competition. And therefore, I'm confident. And my personal view on the share price is there's a good windows of opportunity until the market realizes that there are companies who will profit from AI software companies and some of them will struggle with AI. And we are on the part which we profited. So -- and if this comes through as an opinion in the market, I think we will see a better share price with the same data from today. So thank you very much. Have a good day, a successful day today and seeing you on the next one-on-one.

Thank you very much.