TAKKT AG (TTK) Earnings Call Transcript & Summary

Welcome to the Preliminary Full Year 2025 Earnings Call of TAKKT AG. The company's CEO, Andreas Weishaar; and CFO, Timo Krutoff, will guide you through the figures in a moment followed by a Q&A session via audio line and chat. And with that, I hand over to you, Mr. Weishaar.

Thank you very much. Thank you, and welcome to our quarter 4 earnings call. I'm hosting the call together with our CFO, Timo Krutoff, who will present our financials in detail in a few moments. To start the call, let me briefly give you an overview of key developments and look back from the financial year 2025. To summarize, it was a difficult year, and we did not achieve the targets we set ourselves at the beginning of 2025. The market environment remains volatile and challenging. But we also must acknowledge that winning back customers and seeing the full impact of our commercial initiatives is taking longer than we had initially anticipated. We are progressing with our TAKKT Forward strategy and are seeing encouraging results from many of the initiatives we launched last year. I remain convinced that we're on the right track. More on that in a few moments. Before that, let me first take a closer look back on last year. Looking at the economic environment, I want to highlight 2 topics here that you're all aware of. The first is the high level of uncertainty and volatility in the market, Liberation day and tariffs, the continuation of geopolitical conflicts, the impact of DOGE-related activities and the U.S. government shutdown, all affected the U.S. environment and, at the same time, weighed heavily on businesses in Europe. The second topic is the continued weakness in European and particularly German manufacturing. Automotive and other export-oriented industries struggled significantly in 2025. Looking at the GDP growth. This resulted in very limited expansion in Europe with the Eurozone showing an increase of 1.3% and another year of stagnation in Germany at 0.2%. In the U.S., GDP growth remained higher at 2.1%, yet softened compared to the prior year. Despite the positive growth, job creation was very limited in the U.S. throughout 2025. Having a closer look at the relevant markets for our divisions. Our European I&P business operated in an environment where manufacturing PMI values signal continued contraction in both the Eurozone and Germany. And where we saw a continuation, if not acceleration of negative order intake trends and job cuts. In consequence, our customers remain hesitant to invest in new equipment. In the U.S. office furniture space, we experienced a decline in demand from government customers but also from adjacent segments such as health care and education. This was a result of the DOGE activities. In Q4, the U.S. government shutdown in October and early November had a notable additional impact. Demand from business customers was also muted due to uncertainty stemming from import tariffs. In Foodservices, the restaurant performance index remained below the expansion threshold for most of 2025 reflecting declining customer traffic at U.S. restaurants. The December report highlighted a 2% decline in restaurant sales and a 1% decline in customer traffic year-over-year. Foodservice equipment suppliers reported lower year-over-year sales in 3 of the last 4 quarters. Let's continue with last year's results. Sales came in at EUR 946 million (sic) [ EUR 964 million ]. Adjusted for the sale of Mydisplays and foreign exchange effects, that is an organic development of minus 6.6%, significantly better than our run rate in 2024, but still a year-over-year decline. Looking at the different divisions at I&P, we saw an overall improving trend over the course of the year, especially in our focused customer segments and product groups. Our Display business returned to positive growth and order intake in our Office Furniture business also improved steadily quarter-over-quarter. Foodservices remained more challenging with a double-digit decline in the second half of 2025. EBITDA was just below EUR 20 million, impacted by more than EUR 16 million in onetime expenses, a similar level to the year prior. The adjusted EBITDA margin came in at 3.8%, influenced by the lower top line and the lower gross profit margin. Cash generation was strong in the second half, especially in quarter 4, where we compensated for the slightly negative cash flow of the first 9 months and ended the year with a positive free cash flow of EUR 10 million. All in all, quarter 4 performance and the market environment were in line with expectations, and we closed the year at the lower end of our guidance. As far as our capital allocation priorities are concerned, in the current environment, we are putting priority on investing into the business to accelerate and strengthen our processes and systems with investments in IT and AI as well as developing our great team. Consequently, we will propose to suspend the dividend for 2025 at the shareholders' meeting. We are committed to resuming substantial dividend payments in the future based on sustainable earnings and cash performance. Before handing over to Timo, let me update you on where we stand and what we achieved with our TAKKT Forward strategy throughout 2025. We are focused on our core business and play to our strengths. We follow a management approach where we have allocated a greater degree of ownership and responsibility on a divisional and local level to operate even closer to our customers. This is both true for our approach within the Industrial and Packaging division as well as for how we run our U.S. businesses. We have strong leadership teams in place. Earlier this year, we have further strengthened the division leadership for I&P and Foodservices by onboarding outstanding industry experts who both have ample experience in developing and running successful organizations and accelerating growth. Today, all leadership teams are closer to the customers, executing plans to improve our go-to-market and operating performance and are fully empowered to do so. As part of our focused efforts, we successfully wound down our Foodservice contract business. This was a very volatile business with very low profitability. 2025, we delivered most of the orders in hand for this business and stop bidding for new projects. This will help us to focus on our core strengths and better serve customers with our service and advice-oriented positioning. And thirdly, we further developed our Displays business, integrating the much smaller Post-Up Stand brand activities into Displays2Go. This integration is the last step in a longer process, and we have made sure that we successfully moved customers from Post-Up Stand over to D2G. Going forward, this focuses our activities and streamlines our market position. Looking at our commercial initiatives, we started to substantially improve our assortment last year. This includes our 80/20 simplification approach, where we reduced the depth of our product range and increased focus on items that really are in demand and that drive higher value. And we are step-by-step adding new products to offer our customers a wider range of categories and develop into a one-stop shop solution provider for them. Within I&P, we revitalized the brand landscape to increase visibility and awareness in the market. For example, we reactivated ratioform as a category brand for packaging and brought back the national brands of Frankel and Vink Lisse under the KAISER+KRAFT umbrella to leverage the brand strength we have in our portfolio. This is an important lever to win back customers and generate new business in these markets. In Foodservices, we made progress in expanding sales with private label products and restaurant chains in line with our strategy. Private label increases our relevance. It gives us better control over margin. Restaurant chains offer great repeat business potential. EUR 5 million in sales generated in 2025, underpin the potential we see with restaurant chains as does the growing lead pipeline for 2026 and beyond. At Displays2Go, we confirmed and accelerated the positive organic growth trend from quarter 3. This is supported by rebranding and the new brand positioning to pivot towards being a service provider and to unlock higher value and repeat customers. We are encouraged by the customer response and the improved commercial performance. And finally, at NBF, we made multiple commercial improvements, including our Design My Office approach, that leverages our strength in supporting customers with advice and additional services. Even though the environment remained challenging, this demonstrates that targeted commercial initiatives can stimulate demand and lead to higher-value project businesses. Taken together, these examples illustrate that our growth initiatives are taking hold. While we expect tailwinds from the overall market environment, the traction we see in several parts of the business gives us confidence that we're moving in the right direction and that the commercial levers we are deploying will contribute more visibly as we progress through 2026. Let me now briefly touch on the performance pillar where we continue to strengthen the foundations of our operating model and improve the efficiency of our processes. First, we successfully established the TAKKT Competence Center, this includes a captive part where we leverage scale advantages and strengthen our IT and AI capabilities in-house. We then roll this out across the group to support the divisions with expertise that helps them to operate more efficiently. And it includes and enables a non-captive part where we standardize and relook at transactional processes, improving scalability and efficiency. We see clear benefits from the setup and will increasingly move additional processes over to the TCC during the course of 2026. Second, we made meaningful progress in automating and accelerating core processes through the increased use of AI and system improvements. We started with simpler processes like translation of product descriptions and order entry and will now move towards additional use cases. These upgrades will only reduce manual effort, but also improve reliability and speed, 2 elements that are critical for higher service quality and better customer experience. One example for more advanced use case is automation of supplier product data integration for one of our Foodservice brands. Here, we are using AI technology to process vendor data that is provided in very different formats. We then use semiautomatic and AI-supported workflow that categorizes, enriches and translates the product information and then feeds the content into our PIM system. This significantly accelerates our time to market, reduces manual tasks and costs and helps us to boost growth by better reacting to market trends and customer demands. Third, we streamlined our warehouse footprint in the U.K. and in Foodservices. These measures reduce complexity, lower fixed costs and help us run logistics operations more efficiently. The consolidation steps taken in 2025 are an important prerequisite to improving margin, especially in businesses that continue to operate in a critical market environment. With these efforts, we remain on track with our run rate savings now achieving more than half of our EUR 30 million goal. This shows that the structural initiatives we have put in place are delivering the expected impact. The savings are helping us partially -- to partially offset the consequences of the lower top line and create the room to continue investing in our transformation. And with that, over to Timo for more detailed view on our financials.

Thank you, Andreas. Let's take a deeper look at the group performance in the last quarter of 2025 before we move on to the full year preliminary results as well as the divisions. In quarter 4, group sales were 10.4% below prior year and came in at EUR 228 million, impacted by the weaker U.S. dollar and the sale of MyDisplays in 2024. Organic growth came in at minus 6.7%, with continued stabilization at I&P. OF&D and Foodservice were in low double-digit organic decline. EBITDA in Q4 came in at negative EUR 7.5 million, biggest impact for lower EBITDA remains the lower top line and very high one-offs in Q4. Gross profit margin was 0.8 percentage points below prior year, which is mainly due to one-offs related to inventory valuation. Adjusted for these effects, the gross profit margin is 0.3 percentage points above prior year. On adjusted costs, we reduced our personnel expenses and we continue to optimize and reduce our marketing costs while also investing in our transformation with systems and process improvements. The onetime costs of EUR 12.2 million in the last quarter were mainly related to the setup of the new operating model at I&P. In addition, there were some costs related to warehouse optimizations at Foodservice and in the U.K. Due to the continued top line decline, the adjusted EBITDA margin stood at 2.1%. Now let's take a look at the preliminary full year results for the group. At EUR 964.3 million, sales were down 8.4% year-on-year. Currency effects and the MyDisplay sale negatively impacted top line with almost 2 percentage points. Adjusted for these effects, organic growth was at minus 6.6%. Both I&P and Foodservice showed a mid-single-digit decline, while OF&D is still down double digits. EBITDA was EUR 19.8 million after EUR 55.7 million last year. Again, we see the biggest impact coming from lower sales with an additional effect coming from the lower gross profit margin. Looking at adjusted costs, we were able to realize substantial savings in personnel expenses. Significant savings and marketing expenses were compensated by increased IT prices. These were related to improvements in process and systems, but also by a switch towards increased use of Software-as-a-Service solutions. And with that, a shift from capitalizing these expenses and instead now booking them directly into OpEx. Onetime costs were at a similar level for the prior year, and therefore, again, very significant. Here, we show that we keep investing in our future setup. Adjusted EBITDA margin was at 3.8% after 6.9% last year. Let's now have a more detailed look at our divisions, starting with our core business, I&P. In the fourth quarter, we saw a slight improvement in the top line development compared to the first 3 quarters. This is despite the environment remaining challenging for many of our customers. Germany had a tough year in 2025. At the same time, we are seeing better developments in other regions, especially the Nordics and U.K. were performing relatively well. Gross margin declined by around 1 percentage point in 2025, partly due to more attractive pricing. Adjusted for onetime effects, I&P realized cost savings in personnel and marketing. Transformation-related costs were higher than prior year. This is true both for one-offs and for IT costs. Onetime costs added up to almost EUR 10 million. This was mostly to the implementation of the new operating model. On adjusted EBITDA, the margin was 7.7% after 11.8% last year due to the lower top line and the gross profit margin impact. Continuing with our performance in the U.S. At OF&D, organic sales development in quarter 4 and the full year 2025 were very similar at just below 10% minus, unfortunately. We were -- we've talked about the difficult market for NBF in the last calls. As Andreas mentioned, we saw restrictive ordering from government, education and health care customers. D2G on the other hand is performing much better with now the second quarter of positive organic growth. Margin and cost management worked well at OF&D with significantly lower marketing, personnel and other costs when adjusted for onetime effects. This helped to compensate part of the top line impact on adjusted EBITDA margin. At Foodservices, the low double-digit organic decline continued in the fourth quarter and led to organic growth of minus 6.6% for the full year. Gross profit margin is 1.4 percentage points below prior year and impacted by freight and tariff effects as well as inventory valuation. Adjusted for one-offs, cost management allowed us to compensate for some of the top line and gross margin impact. However, we remain in a very difficult situation with this business with adjusted EBITDA profitability at minus 0.7%. Let's now continue with cash generation for the group, where we had a strong end to the year. Cash flow before change in net working capital followed the EBITDA development in 2025. On net working capital, we continue to release inventories and also saw cash in from decreasing trade receivables. Operational CapEx was lower this year, and we had a cash in of a bit less than EUR 2 million out of the sale of real estate that we no longer use in the Nordics. After the cash out in H1, we significantly improved our cash generation in the second half of the year and closed with a positive free cash flow of a little more than EUR 10 million. Looking at our balance sheet. Net financial liabilities increased by EUR 17.5 million to EUR 131 million. Biggest impact here was the dividend payment in May. Equity ratio was impacted by the impairment but remains above 50%. We continue to operate a very solid balance sheet. As we have already anticipated in our update in November, we did substantial goodwill impairments at the end of the year. The total impairment came to EUR 125.5 million. More than half of the amount resulted from value adjustments at Foodservice. The rest is from OF&D with the adjustments at D2G being significantly higher than NBF. The remaining goodwill for the U.S. division is EUR 40 million. So the majority of the goodwill in the balance sheet was allocated to I&P, where value in use is significantly higher than book value. And with that, back to Andreas for the first view into 2026.

Thank you, Timo. Let me give you a brief glimpse of what we expect for the current year before we open the Q&A session. Please be aware that this is just our current view on the year, and we will publish our 2026 guidance end of March. Starting with the environment. We expect economic uncertainty and volatility to persist. This includes a continuation of geopolitical conflicts and as we have seen over the past days, also continued uncertainty around tariffs and trade disputes. We expect GDP growth broadly similar to 2025 in the U.S. and Eurozone with a gradual improvement in Germany. Manufacturing PMIs have been trending upwards at the beginning of the year. It remains to be seen if this trend will continue and stabilize. On fiscal and monetary policy, the U.S. is likely to ease conditions while Europe could remain more constrained. Against this environment, here's how we set our priorities within the TAKKT Forward strategy. Focus: We will continue to strengthen local responsibility and accountability. Commercial decisions are taken closer to the customers and specific to each brand and location. At the same time, we will secure group synergies to further optimize cost positions and scale activities where possible. Growth: For growth, we will push commercial measures targeted at our core customer groups. I've talked about what we are working on earlier in the call. We will also further improve procurement by expanding best cost country sourcing, notably and implement more differentiated and more competitive pricing enabled by [indiscernible] saving. And we optimized the assortment to concentrate on fast-moving items while adding new categories to better serve customers. And last not least, as far as performance is concerned, we will continue to leverage our operating model to digitize and automate additional processes enabled by accelerated process and system improvements. And we will work on further increasing our efficiency in freight management and warehousing. This includes an integration of freight pricing into the overall pricing process and further steps to streamline our warehouse footprint. Looking at financials, we will give a precise guidance at the end of March when we publish our annual report. Let me still share our current view on top line earnings and cash development. We expect a muted start to the year on top line with a continuation of negative year-over-year sales development. We foresee to gradually return to positive organic growth over the course of the year as our commercial measures gain traction. On profitability, we will continue to execute structural improvements to our cost base, some of these performance measures will result in additional onetime costs from structural improvements, while potential for short-term profitability increase remains limited, we are convinced that these measures will ensure substantial margin improvements in the mid and long term. On cash, despite higher CapEx to fund efficiency and growth and lower contributions from release of net working capital, we target positive free cash flow driven by disciplined execution and CapEx management. We look forward to sharing an update on our strategy progress along with an output into 2026 during our analyst call on March 26 with the publication of our annual report. And with that, we're happy to take your questions. Over to the operator for Q&A.

Thank you very much, Mr. Weishaar and Mr. Krutoff. [Operator Instructions] The first hand up from Christian Bruns.

My first question is on the loss-making Foodservice segment. Any specific idea of getting rid of this [indiscernible] bleeding there? Or is it the measures you set in your new operating model, Simplify, Automate and Relocate? Or are there specific measures there to stop the bleeding?

Thank you very much, Christian, for the question. As far as Foodservice is concerned, what we -- from an overall market perspective, what we're seeing are 2 trends or implications from; a, lower restaurant traffic; and secondly, higher input costs for restaurants that is driving lower demand overall as well as, obviously, price increases as providers pass on tariffs to their customers. In an overall subdued demand environment, we're not immune to this. This is what we're seeing. You know we spoke extensively about issues we had in 2024 and resolved in 2025. Our business strategy does foresee, as I briefly outlined that we increased our private label as well as our parts activities, which will drive higher margin opportunities and more longer-term relations with customers as well as further expanding and building on the pipeline we've built when it comes to emerging restaurant chains who -- which are chains that are not only opening one but multiple stores and really require an excellent fulfillment provider such as ourselves. In addition, we obviously continue to work stringently exactly as you pointed out, also improving operations. We have consolidated our warehouse footprint. We've exited lower performing business so that we can focus our attention on what is driving future profitability and growth for this business.

Okay. If I may, a second question, just on the tariffs. I'm a little bit confused about the situation as I think some are. I know, of course, your -- the most important tariffs for you are for imports from China or from Asia. Is there anything -- has there anything changed from the judgment of the highest court in the U.S.? Or is there -- yes, is this also the 15% now, which is the new global tariff? Or -- just could you give some explanation?

So the announcements from the Supreme Court as well as from the administrations are still very recent with relevant information still unfolding. Frankly, not unlike what we experienced last year. Thus, it's very early to make reliable statements. As you can imagine, we're obviously tracking very closely the tariffs we pay, be it the fentanyl or the reciprocal or other tariffs throughout past years, and we're making relevant registrations to claim back tariffs should they be fully ruled out. As far as the 15% newly announced tariffs are concerned, it depends really on the business and import classification code if it results in a lower or a higher burden to the business. As you correctly pointed out, and so does our calculation show that it's being equal to slightly positive. For example, for China, where we could see tariffs going from 20% to possibly 15%, and that is, as you will recall, only non-IEEPA tariffs under Section 301, those remain in place because they were from the prior administration. That said, we'll see how this is implemented in the coming days and weeks and we'll manage accordingly. This past year, our U.S. supply chain teams have become very good at this, I may say. And overall, we will continue to focus on best serving our customers by improving our business and our operations. What doesn't help our customers is yet another addition to overall uncertainty.

Thank you, Christian, for your questions. Ladies and gentlemen, the floor is yours. I will hold the room. And Christian, you have some more questions. Is that it?

Maybe can you a little bit more elaborate on this Design My Office initiative? I think this could be a good idea to become more relevant to bigger customers or to have an additional -- a good idea for an additional service element. What do you do there?

So overall, what you see us doing across the divisions is moving significantly closer to our customers with more differentiated services and -- where we also see the opportunity to set us apart from other market participants, right? We are an established omnichannel player that has an omnichannel experience, and as such for -- just to take the example of National Business Furniture where the team developed an on and offline service capability to cater to customers that do not really understand yet the requirements they have to fit out their office. So they come with a budget requirement. They come with a certain room, size and they come with a requirement in terms of what number of people need to be fit in, what type of storage needs to be established and the like. We're able in record time to turn around requirements and allow for alterations and interactive alterations of demand, both on and offline, which we're seeing initially very positive results. And that gives us -- and I think that's part of the benefit of our business, the opportunity to also scale this initiative across other divisions, and other businesses where we sell furniture, but also leverage experiences into when we start fitting out restaurants.

Okay, that sounds promising. And then on your outlook, you said you are positive for the second half or to see a turnaround in top line there. But of course, visibility, I know I mean for the first quarter, your visibility will be much higher than on the second half. So what makes your -- could you add a little bit more flesh to the bone, what do you think what might trigger this turnaround?

So 2 things really. Obviously, we do have collected and built and implemented a lot of initiatives during 2025 that were set and are fundamentally improving business performance, as noted, in leading indicators we are tracking, be it performance of online channels, be it number of visits to customers, be it a number of project businesses. Leading indicators for tracking that we're seeing that we're generally moving in the right direction. In 2025, we saw that particularly larger project business decisions were pushed out given the overall market uncertainty. And while some of the more transactional business held up, as we move into 2026, we're building on those foundations established. And we also put in place additional acceleration plans with a very detailed market by market, for example, in I&P program plan, where we play to our omnichannel strength, really leveraging the site of on as well as on-site offline with our customers and anything in between. Some of these initiatives and the additions we're introducing, they will require some additional time to materialize. And please, overall, do not forget that our business starts rather slow into the year. The first couple of days in January, right, are general vacation days or holidays and then people return. So it's really starting the second half of January, specifically in Germany this year with the bridge and all bank holidays. So usually, that is then the time where we see additional progress. And also, we're bringing back notable commercial initiatives after the summer break that we are confident will equally support our commercial progress further.

Okay. And then maybe a last question to Timo Krutoff. The EUR 40 million left in goodwill. I assume they are related to the National Business Furniture, is that right?

Yes. The biggest -- you're correct. The biggest portion of that is related to NBF. So we have EUR 27.7 million out of those are related to NBF and then we have close to EUR 5 million at D2G and at Foodservice EUR 7.6 million. So there's a little bit left in all 3 of them, but the biggest portion is the NBF, yes.

Okay. I was -- that's really interesting because I think with this Foodservice performance, I was -- I thought it would already had been wiped out now, okay. But -- okay, it's only -- it's not so important this information, but just for my...

The next question has already arrived. The next hand is up from Stefan [indiscernible].

So just regarding the goodwill. I think there's still more than EUR 300 million goodwill or intangibles in Industrial and Packaging and also in Industrial and Packaging, of course, a margin decrease in 2025. And I just wanted how comfortable are you with the goodwill there? This is the main part of the intangibles? And what kind of scenario do you need to underline these intangible valuation that you got at the moment. So do you need to see an increase in EBITDA margin in 2026 in order to avoid any further write-downs?

So first of all, thanks for the question. And I think on the I&P side, we have a lot of headroom. So that was not at all anywhere close to any impairment risk so far. We do -- we could still even decrease the EBITDA margin by a couple of percentage points on the I&P side and still would be fine. So from our perspective, there is really no risk as of today. I&P still stays a very profitable business for us. That's also why -- one of the reasons why it is our core. So I don't -- again, as of today, there aren't significant changes in the environment, I don't see any risk.

Thank you very much for your question. And for now, we have no further questions. I will hold the room another moment if you should have any left, ladies and gentlemen, and that doesn't seem to be the case. We have come to the end of today's earnings call with that. Thank you very much for your interest in TAKKT AG. A big thank you also to you, Mr. Weishaar and Mr. Krutoff for your presentation and your time. Should you have any further questions at a later date, please feel free to contact Investor Relations. I wish you all a successful day and handing over to you, Mr. Weishaar once again for your closing remarks.

Thank you very much for the facilitation. And thank you, everyone, for your participation today. We will keep you updated, and we're looking forward to continuing our conversation when we publish our annual report and hold our analyst conference on March 26. Have a great day.