The Platform Group AG (TPG.F) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to today's business update call of the Platform Group AG. I'm delighted to welcome CEO, Dr. Dominik Benner; and Head of Investor Relations, Nathalie Richert. The Executive Board will present TPG's 5-year vision until 2030 and inform us on current M&A topics. Please note that in today's call, we will only provide the chat to take your questions after the presentation. And with this, Dr. Benner, the stage is yours.

Yes. Thank you, Judith. Thank you for the introduction and also a warm welcome to the audience from my side. Today, we present our Vision 2030, and this is quite an important part of our corporate strategy because we have a very strong growth plan for our group. And so let's just reflect with the current position here. So Nathalie and me will present today, and we will go through the next and following slides on this presentation. So here, you can see the overview of our group. As you can see here, we had a pretty good and very successful development over the last years. So we are almost for 2.5 years at the stock exchange. And all our guidance we always delivered and all our outlooks for revenue, for profit and so on, they were, I think, quite reliable. And as you can see here, we also had a good increase in our EPS ratio, and we also can increase our margins. And the margin is a very important point today because we will outline how we will increase it, and we will show you how we can achieve higher margin levels in the next years. So the background of our company, as you know, is very old. So one of my ancestors started the business in 1882 with a brick-and-mortar store. And in 2012, we changed the company completely towards e-commerce and platform strategy, and this change was quite successful. So now for 14 years, we run this business. And today, we have the e-commerce activities for almost 16,000 partners. And we do it because we now have almost 7 million customers in 28 different industries. And the key features is really that we are an asset-light model. So we do not have huge inventory. We can really scale it up with our software. And I think we have a pretty good process excellence established in our company. Nathalie, when we look at the stock, what can you say here?

Yes, we are a scale-listed company in Frankfurt, that's a growth segment. And we get into scale via a reverse IPO. That means that you can see in the chart, since 2023, we are a scale listed company, and we started to enter fashionette in the year-end of 2021 -- 2022. And you see we have a very good development since that. And we have 6 houses which cover us. You can see the research reports on our Investor Relations web page. And we -- you can trade, TRADEGATE and [indiscernible], and we have a market cap in average from EUR 200 million. And very interesting why we show you that what we see since the last year, since September 2024, we have a very good development in international trading that you can see in the chart. We have more than 50% more international trading -- and on the other side, what you see, and I think that's very important for our scaled listed company, our liquidity continues to strengthen. That means we have now 4x more trading volume per month than a year ago. And in August, you see that the trading volume was a little bit higher. That was because we have news flow with our figures and other topics. Yes. And we engage actually so much with international investors, and I will think our strategy rise in the international market perception will we see in the next years in the trading activities. Yes. And I hand over to Dominik.

All right. So let's start with our Vision 2030. So here, you can see the cornerstones of our development. So we changed our strategy in 2012 with the digital transformation. This was quite successful. And in 2025, so currently, we run 37 platforms, and we have a huge customer base. And with our platform and our software, we can enter new industries in a very simple way. And when we decide to enter a new industry, we only need 4 months, sometimes 5 months. So it's pretty fast, and we can expand there. So now we come to our Vision 2030 because it's very important that you understand what kind of business we built here and what is our growth strategy. So we plan for the next 5 years, a total revenue of EUR 3 billion. And the most important thing is that we just don't want to grow because we want to grow. Now we also want to increase our margins. So right now, we are around 8%, and we will really increase that with a lot of different measures. It is not coming by itself. So we really have to work on that, but we are very optimistic to achieve that. And we will make double-digit margins in the next 2 years, we will achieve it. So this is also possible in 2028, not in 2030. So we will also increase it before. And additionally, we'll also mention the leverage. I will come to that later that we want to decrease our leverage factor. And as you can see here, the basis of our growth is the number of partners. So if we have more partners, we have much more customer base and we have more products, and this is quite important for us. All right. So how we can do that? I will show you that. So right now, in the last years, when you see that we have a CAGR of 30% each year, and we expect more or less the same level for the next years. So there will be not such a big difference here. And we are quite optimistic that we achieve also in the next year, our growth rate. So as you can see here, when we started in 2022 with the stock listing, we had EUR 330 million revenues. Next year, we will achieve EUR 1 billion. And the difference to the EUR 3 billion is just a continuous track with our CAGR rate. How does it come with the increased revenue? So we have 3 very important factors. One, it is scale. So when we talk about getting new retailers, new partners, this is the most important thing of our growth rate. And when we want to grow, we have to get more partners and more industries. So this is the most important one. And coming with more partners, we will get more products. And we'll also increase our B2B share. I will show you that. So this is the most important point. So we expect EUR 900 million revenue additionally from this segment. So when we look on synergies, we will enter new industries, and we will also enter the U.S. market next year. And on the right side, you see also that M&A will also continue to be a relevant part of our company, and this will bring additionally EUR 800 million in the next years. So let's start with the first point, growth of partners. So as you know, we work for retailers and for manufacturers. And right now, we have around 16,000 partners, and we will increase this number every year. So in the last years, we had always a CAGR of around 15% to 20%, and we will definitely continue with that track. So here, you can see that with the CAGR, we expect another increase of 19% per year, and we will achieve -- we want to achieve 40,000 partners until 2030. And very important, and this is directly related to that, we will increase our products by more than 220% because every partner brings us new products and new categories, and this is quite important for us to achieve this growth rate in an organic way. Next thing is the B2B share. So right now, we are with 62% in the half year in the 9-month figures. We are very much focused on consumer goods. So this is a B2C business. But in future, we will focus much, much more on B2B. So here, you can see our prediction for 2030 that we will almost achieve 60% revenue from them. So all the other segments like industrial goods, freight goods and especially B2B, they will come to up to 60% from currently 38%. So this is really important to understand that our growth rate is on all segments. So all segments are growing, but we really want to add much more B2B customers and clients here, and they will bring us additional revenue and profit. Also important, right now, we cover 28 industries. For 2030, we plan to expand it to 50 industries. So each year, we have to get more industries that we can run our software there and ramp up our platform there. Very important, and we also announced it at our Capital Markets Day, we will enter the U.S. market because it will be one of our core markets. So we have a very specific plan now that we will enter next year. We make it with a low-risk strategy because entering a market is always a difficult project. It's not free of risk. So we always have to manage it that we have to take a low-risk strategy. And we have multiple small steps to enter this market. But now we have a very clear strategy and our strategy is that we start with our own platforms there and start with delivering goods from Europe. And the next step is also next year that we will acquire 2 companies there, focusing on an e-commerce and platform. And with these companies, we start connecting retailers and partners there. And with this strategy, we can really do this expansion with a very low risk profile, and we really try to avoid any kind of cash burning because we don't want to burn any cash with such an expansion. Next thing is about our track record. So we will also continue our track record with M&A. In the last 5 years, we had 35 acquisitions. And on average, we had 3 to 11 acquisitions per year. And so when you see here, our return on capital employed was always above 20%. So this is quite a good number when you compare it with our own loan costs, interest costs. And very important is also to mention that we increased the EBITDA margin of our acquired targets by more than 42%. So this is, I think, a very good track record. Not every acquisition is perfect. Not every acquisition is an easy case. But overall, we can be quite happy about our development here, and we will continue with that. Next point, and this is even more important than revenue, it's about our profit. To increase our profit and to get higher margins, we have several measures, which we will do and which we will execute now. So first one here, you can see our margin development. So in 2023, we had 5% EBITDA margin. We improved it now to 7.5% as our estimation for this year. Maybe we will achieve a little bit higher, and we will directly continue this track to achieve double-digit margins in the next years. As I mentioned in the introduction, we will also achieve it -- not in 2030, we will achieve it before. So we can also evaluate that in 2028, it's a realistic goal to already achieve double-digit margins with above 10%. So here, we have our internal planning, and we are quite optimistic that we can already achieve it there. And when you see on our portfolio list, and this is also a very clear thing to mention, we acquired a lot of companies here. And we bought big companies, we bought medium companies and small companies. And we decided to focus much more on relevant subsidiaries. That means we think that very small companies with a very low contribution to our revenue, we will sell them. And we think that they are not much more in our focus anymore. So right now, we think that there are 3 subsidiaries, very small ones. They only have 0.2% of our revenue. They are okay, but they are not big enough for us in the future, and they cost us too much management attention. And so we really have a clear portfolio focus to have much more discipline on that and to strengthen our portfolio and to say, okay, we focus much more on bigger companies instead of small companies where we don't know how long it takes to get them bigger. Next point is the AI first program. So to be honest, 2 years ago, if you would have asked me how much is AI important for our company, I would say, well, we can use it maybe for some things, but it's not so relevant. But we completely changed our mind there in the last 12 months. So we took all our executives to Silicon Valley to Palo Alto. We really had great workshops and deep dive sessions with the leading companies for AI there. And we realized how important it can be that we have to implement it into our company. And this is just not a buzzword presentation here with AI. This is about changing our company in each of our processes. So when we started it, right now, we have already optimized 15% of our processes in our group, but this is not enough. We can absolutely not happy with that. We really have to implement it in all our relevant departments and segments. And so this is the biggest project in our company internally. We never had such a big project here and it is affecting almost every process. So here on the bottom, you can see that we will directly change our software development. That means we have to change with AI, our coding system. This is not a thing for some weeks. It's a project for 2 years, but we are very optimistic that we will make a good job there. The next thing is online marketing because as you might know, online marketing is a very automated and very efficient process already, and AI will also change that. When you look go on Google, you see all the AI results already, and this will bring a humongous change in the e-commerce world. Additionally, also in the content creation, you know that we make a lot of pictures, content creation with models and so on. We will ramp it down by 50% because we can do it with AI in the future, and we already started with that. And the last point is HR and finance. We think that accounting can be much more simplified with AI, and we can use the people from the accounting department for much better things than just stupid things in the accounting system. Next part is the leverage. Also very important. We think that we can decrease our leverage ratio by a lot. So right now, we have 2.2 leverage ratio, and that means net debt to EBITDA adjusted, and we will decrease it in the next years, and we can also decline the cost here for interest because I think we have a good cash flow, we have a good operational cash flow, and we can use it much more to reduce our debt structures here. All right. So that was it from my side. We also uploaded this presentation with some backup slides to give you more detailed information. And now we would like to hand over to the Q&A session.

Yes. Thank you very much for your presentation and the infusion of your strategy, Dr. Benner and Ms. Richert. [Operator Instructions] Dr. Benner, Christian Wall from Cantor. First question, could you elaborate on the scalability of the TPG ONE platform? How much sales would you be able to generate with the [indiscernible] setup? And second, could you provide some color on how TPG creates cost synergies when integrating new platforms and give some examples such as lower fulfillment costs per parcel thanks to scale advantage.

Yes. Thank you for that. So absolutely, you are right with that. The scalability of TPG One is quite good because we developed it always with the perspective, how can we enter new businesses, new industries and how can we increase the speed for that. So right now, we think that we can generate a very high increase in the sales. But this question is very broad. So maybe it's a good thing for our next earnings call to provide you more information with that. And also, we can provide you directly more information about TPG1 in the next presentations here. So your next question is about the cost synergies. So currently, we expect something between EUR 8 million and EUR 15 million directly within the next 2 years with our decrease in costs with AI. So these are direct cost effects. And I think -- this is a very conservative number. We really just planned it on a very basic way that we go through every department, say what kind of process we can increase, how can we reduce costs in utilities and software and also HR costs, of course. And so we calculated this number with EUR 8 million to EUR 15 million. And I think this is realistic where we can work with definitely. The next question is about how much AI benefits is included in your EUR 20 million to EUR 80 million EBITDA for next year. So actually, we expect next year between EUR 8 million to EUR 10 million in EBITDA for next year, it is included. So we expect this EUR 8 million to EUR 10 million cost savings for next year. And our guidance with EUR 70 million to EUR 80 million EBITDA, it is also reflecting this. So we included it.

An uplisting...

So next question, about uplisting, yes, uplisting. So right now, we are in the scale segment. I think next or next 2 years, we will prove if an uplisting makes sense. Right now, we have no decision so far. Next question. It's about a capital increase or a new bond. So right now, we have no decisions on that. And so we will go our own way with the current structure and the current strategy. But as you know, we make a lot of M&As every year. So if we have a bigger target or if we have a big acquisition where we say it could be necessary to do that, of course, we will evaluate that. How is the acquisition closing of the pharmaceutical companies progressing? So actually, we have 2 portfolio companies already in the pharmaceutical sector and the other ones, we just can say we have a signing and the closing, we expected a closing until December or January. That's what we communicated, and that is our current communication here. Next question is about more color on our expansion on the U.S. market. How much of your future organic growth could be attributable to the United States? And what are the key challenges there since the largest market for e-commerce with fierce competition? Yes, this is a complex question. So first, yes, it is a big market. Yes, there is competition. But to be honest, when you look on how many platforms you find for retailers with our business, what we do here, we do not find so many competitors. So we -- as you know, we really much focus on niche markets. So we don't want to sell T-shirts for $10. It's not our focus. We really want to sell niche segments like used machines. It's a very big market in the United States. And there are not many competitors out there or when you look on the luxury sector, I mean, there are, of course, other players in the luxury sectors, but there is no platform for retailers, for luxury retailers. So I think we have very attractive possibilities to enter there. And to make sure that we have a successful business model. We would not enter a market if we are not sure on that. And as you know, we have still a very -- we have 70% revenue share with Germany, Austria, Netherlands and so on. And we want to change it, and we will change it in the future. But it's not a hardcore step from 17% to 20%. This will really go every year step by step. And we think that U.S. will definitely contribute to our future growth, but we are very conservative with our estimation. So we always want to go low balling here and say, okay, we start with little steps. We make little revenue contributions here. And when we see it's getting better and higher, we will communicate that. Next question, it's about our EBITDA margin premium size the assortment with less SKUs and less discounts and less products contrast to the core idea of the platform. Well, this is wrong, what you ask me, we do not reduce the number of SKUs. We do not reduce the number of products. We just said in our vision that we definitely delist cheap products. So we just makes the decision that with cheaper products, for example, in the luxury sector, everything below EUR 80 or EUR 100, it is not useful for us. It's not too much contributing to our profit. And that's what we will delist and reduce. But in total, we really increased the number of products by a huge amount. So we expect an increase of 220% in the next 5 years. So this is really a tremendous upgrade from the current status. And there, you can see how much new products we will get with our new partners. So we will grow also in the number of products. And yes, we will delist cheap products and products which are not bringing enough profits here. Russell Pointon from Edison. Can you talk about TPG with more focus on B2B customers in future? Is there something inherently more attractive about them less cyclical or more profitable? Good question. Thank you for that. B2B customers in generally are not more profitable, but there's one big difference. We are focusing on software and e-commerce. And to be honest, e-commerce platforms for B2B, they are just in the beginning. So it's like 2012 for B2C platforms. It is a very early stage. They are still even in the year 2025. So the most B2B business, they have no platforms for B2B players. So this is quite an attractive market where we can have good growth rates. And that's the reason why we want to expand more there compared to B2C. But of course, with B2C, we also grow, and we have no fears that this is not going to happen. The next question is about -- now that I understand the EBITDA margins level better, do you have any idea of the magnitude, rough percentage of each lever? Do you see a particular one? Yes, that's a good question. Maybe we need a more detailed talk on that. Definitely, the EBITDA margin levers are quite important for us. And when you look on them, I think, to be honest, the AI one is the most important one. As I said, 2 years before, I made a big mistake, and I did not realize what potential AI has and how much AI will affect our process, but I realized this mistake in the last 12 months, and now we changed that completely. And when you really focus on the process, reduce workforces and have better processes, you can definitely increase your cost structure, you can make it better and you can be faster and you can do it with less people. Not everybody likes that, but that's the truth. What are the infrastructure requirements from investing in the United States? We have no infrastructure requirements in specific. But of course, we can use our software. We will need no changes on our software, but we need people there. We need good people, good companies there who we can work together with. And that's what we have to do in the next 12 months. So our ramp-up plan also includes buying 2 companies there. That's our plan for next year and also to get the right people here to ramp up our platform business in the United States. And that's the most important thing for the infrastructure there. Even if a target is promising, the valuation of TPG shares is low. Given this, what are your thoughts on the capital structure and equity offerings? So basically, where we think that, of course, our share can be higher, and we would appreciate higher share prices. But I think it's not our job as a management to comment on this if the shares are lower or not. We can only think that we are a good company and our value of what we do is quite good. And we will hopefully see higher share prices in the future. And to be honest, I don't know any company in Frankfurt with EUR 3 billion revenue with such a low valuation level. So maybe when we achieve this revenue level in the next years, you will also see higher stock prices, but let's see if it happens or not. Next question, it's about related to the change in the focus to nonconsumer segments. Do you have and existing example, for example, I have the Optics and Hearing segment in mind. Yes, the Optics and Hearing segment is not a B2B. Of course, it's a pure B2C game, and it's quite profitable. We have 25% margins there. But on the other side, we see the industrial goods segment as a very good growing market with increasing margins. We have not 10% margins here. We have lower margins. But every year, we can increase our margins, and we are on a very good track with that. So actually, we think the industrial segment like machine trade and other B2B segments are very attractive here. Interesting to see you expect a 50% cost reduction in content cost creation from AI. Are you able to quantify what content cost do you have in a percentage of revenue? Well, that's a good question because in our P&L, we have marketing costs, and we have other costs here. And including the other costs, we have our content creation costs. So it's not in the marketing. So actually, we expect content creation costs of about 1.5% to 2% every year, and we can reduce it by 50% definitely because AI gives you such high options to create content in a much faster and easier way. You can reduce the number of models, you can reduce the number of photographers and you can also cancel all the contracts. We have some photo studios where we pay rent with, where we pay a lot of utilities and so on. We don't need that so much in the future. So it's really changing our content process, and we can save a lot of money there. Next question, would TPG consider listing on NASDAQ as a software company? Right now, we have no considerations to go to the NASDAQ. And to be honest, I'm also not an expert in that. So I cannot really answer this. But right now, we have no plans to make a listing in the United States. All right. So these are all the questions. Thank you very much.

Yes. Thank you very much, and we will come to the end of today's business update call. Thank you, everyone, for joining and your shown interest in the platform Group AG. Should further questions arise at a later time, please feel free to contact Investor Relations. A big thank you also to you, Dr. Benner and Ms. Richert. Greetings to Munich, to the Münchner Kapitalmarkt Konferenz. I wish you all a lovely autumn time, successful businesses. And with this, I hand over again to Dr. Benner for some final remarks.

Yes. Thank you very much. And maybe for some of you who are in Munich today, you can visit us. And when we thought about publishing such a Vision 2030, we were not sure to do that. But at the end, I think it was the right decision to give our shareholders a good perspective on our long-term perspective. and also to show you what our plans in the future and not only for next year, also for the next years. And I think from this background, we are very happy to share this vision with you. And as you know us for 3 years now, we always delivered on what we promised, and we also try to do that here, that we will achieve these goals and that you join our journey here very much. Thank you very much.