Bechtle AG (BECTY) Q3 2025 Earnings Call Prepared Remarks Transcript

2025-11-17 16:17:08 ET

Bechtle AG (BECTY) Q3 2025 Earnings Call November 13, 2025 7:00 PM EST

Company Participants

Thomas Olemotz - CEO & Chairman of The Executive Board

Presentation

Thomas Olemotz
CEO & Chairman of The Executive Board ...

Thank you. Welcome to our analyst conference on Bechtle AG's third quarter of 2025. Thank you for your interest. Ladies and gentlemen, as you all know, we have had some very turbulent quarter, quarters in which Bechtle's business volume growth was unusually low quarters in which our earnings were below those of the same period last year.

Although the reasons were understandable, the situation was nevertheless unfamiliar and unsatisfactory for all of us. Today, however, we can look back on a quarter in which the signs are finally pointing in the right direction. Business volume, revenue and earnings are up and have improved year-on-year. Is this the long-awaited lasting turnaround? I don't want to dampen the excitement right at the start. But unfortunately, we won't be able to answer that question definitively today. However, we will take a closer look at where the improvement in the third quarter came from and why we're optimistic about Q4.

As usual, today's presentation is divided into 3 main sections. As usual, we start with a more detailed look at our key economic indicators for the third quarter and the first 9 months of the 2025 financial year, both at group level and at segment level. This will be followed by some important strategic events beyond the figures that are important for the future of the company before we end up with the outlook for 2025 and the end of the year, so the next few weeks, in fact.

But first of all, let's take a look at business development. Ladies and gentlemen, the third quarter saw encouraging developments. You will no doubt have seen the figures in our press release earlier today. However, this does not mean that the all clear can be given across the board. We still see regions and areas where we face major challenges. Unfortunately, the overall economic conditions have not yet improved significantly and in all regions. But with growth in all relevant KPIs, we have taken an important and significant step in the right direction. Our top line has grown, and we have repeatedly emphasized that stronger growth is also an important prerequisite for improving our earnings. In addition, we have also been able to rein in cost growth, resulting in EBT growth in Q3 for the first time in 5 quarters.

Let us now take a look at the aforementioned top line development, that is business volume. At 8.4%, business volume growth is once again in the high single-digit range and thus within our long-term target range. In purely organic terms, growth amounted to 6.2%. This chart clearly shows the positive development over the course of the year. We have grown from quarter-to-quarter. And allow me to make a small side note. For the first time ever, we exceeded the EUR 2 billion mark in business volume in the third quarter. It is this positive trend, in particular, that makes us confident about the fourth quarter.

For the segments and the regions, this means the following: our international performance is particularly impressive, in my view. We achieved growth of no less than 17% here. And in organic terms, the figure is still almost 12%. These figures clearly demonstrate that our international M&A strategy was the right one. It has broadened our footprint and significantly reduced our dependence on economic ups and downs in individual countries, especially the markets in Belgium and the Netherlands, the United Kingdom and Spain have developed very positively. And it is no coincidence that these are precisely the countries in which we have strengthened our position through acquisitions in recent years. We have thus not only strengthened our existing business activities in these countries, but also used a multichannel approach to tap into new customer groups and support our existing customers with a broader service portfolio.

Let's now take a look at revenue. At first glance, the picture is not surprising. Due to the application of IFRS 15, you're familiar with the context, revenue is lower than business volume. However, we can also see that the discrepancy between business volume and revenue is not quite as pronounced as it was in the past. This is not because our software business has become less successful, but rather because our customers increased their investment in the replacement of their client infrastructure in Q3.

In the end, we don't always know with certainty why a customer chooses to invest in their infrastructure. However, one possible driver in the past quarter may well have been the switch from Windows 10 to Windows 11. Our internal analysis of these developments is still ongoing. The revitalization of our trading business is also an important factor when considering the earnings side. That is EBT. Our EBT grew by 2.4% year-on-year in the third quarter. That is certainly no reason to get overly excited just yet. But ladies and gentlemen, after 5 quarters of declining results, it is indeed very positive news that we are back on the growth path with our earnings.

Even more remarkable, however, is the momentum we saw over the course of the quarter. Compared to Q2, we have improved our earnings by over 20%. The swing amounts to almost 23 percentage points. If we continue to see comparable momentum in the fourth quarter, we will achieve our guidance for the full year 2025. There are 2 main reasons for this positive development. One, due to increased hardware sales, we were more successful than in the first half of the year in obtaining vendor bonuses and kickbacks. And two, the increase in costs was very moderate. Other operating expenses increased at a lower rate than revenue did. And personnel costs in the third quarter were below the level of Q1.

And so to conclude our review of the key figures, the obligatory plants at the operating cash flow. Cash flow, too, developed very positively in the third quarter. It sounds at almost EUR 125 million, reflecting the usual seasonal trend at Bechtle. Not only do we see a clear improvement over the course of the year, we're also within striking distance of the already very strong quarter last year. It is remarkable that we were able to achieve this level despite the upturn in our operating business, especially in September. Normally, such developments are also reflected in cash flow, albeit with higher receivables and inventories on the reporting date, which have a negative impact on this key ratio. This reflects the success of the measures we have implemented in recent years as part of our working capital management, enabling us to better buffer operational cash flow growth, so to speak.

So let us now turn to our workforce. As of the 30th of September 2025, Bechtle had 16,300 employees. That's 692 people or 4.4% more than in the same quarter of the previous year. This increase is exclusively due to acquisitions. The acquisition of Grupo Solutia in Spain alone brought 646 new colleagues to the Bechtle Group. In purely organic terms, the number of employees fell by 1.6%. It remains a deliberate management decision not to expand the workforce further in these challenging times. We are currently relying on natural attrition and are not immediately refilling vacant positions. However, we continue to invest consistently in the training of young people. We are, therefore, very pleased to have welcomed 251 young colleagues at the start of the 2025 training year. As of this 30th of September, a total of 853 young people were in training at Bechtle. And so as is customary at this point, let us turn to what we consider to be the nonfinancial significant events of the third quarter of 2025.

These latest announcements are all forward-looking and underlying Bechtle's future viability. So this time, we look ahead to an important personnel change, 2 acquisitions and perhaps rather surprising announcement on the subject of digital sovereignty and a milestone in our sustainability strategy.

Well, let's start with the personnel change. At the beginning of this week, we published a statement that replaces the question mark behind my succession with an exclamation mark, if you allow me to put it like this. My fellow Board member, Konstantin Ebert, is to take over my position as CEO at Bechtle from January 2027 onwards. Together with the nomination of Chris Jehle as CFO on 1st of January 2026, my succession has thus been settled for the long term and early on. It was important to the Supervisory Board and to me that the transition could take place calmly and according to plan. We have now created the conditions for this. And in doing so, we are once again underlining Bechtle's reliability, both internally as an employer towards our customers but also towards the capital market.

And just to anticipate any questions you might have. My contract runs until the 31st of December 2026. And until then, I will continue to work with the same energy and disciplined, full conviction and enthusiasm for Bechtle.

Let's now take a look at our international acquisitions. With Nuovamacut Automazione, Bechtle has acquired the largest partner for SOLIDWORKS in the Mediterranean region. The company was founded in 1995, is headquartered in Bologna. Has 7 other locations in Italy's most economically powerful regions. The company employs 149 people, and it has to achieved the business volume of over EUR 63 million in the past financial year. The CAD and PLM specialist is the market leader in Italy and counts around 5,000 predominantly midsized companies from the manufacturing industry among its customers. This is an important step for our European positioning in the PLM solution business.

We've also acquired the Dutch IT service provider ITAM Solutions based in Eindhoven. Founded in 2007, the company specializes in IT asset management solutions and offers its customers comprehensive consulting services for cloud cost management. ITAM Solutions employs 38 people and achieved a business volume of EUR 4.4 million in the past financial year. The specialist has already been fully integrated into our subsidiary, PQR.

This brings us to the topic of digital sovereignty, which is currently a subject of intense debate throughout Europe and Germany, in particular. In this field, which is important for the future of all of us, we have broken with our previous strategy of not entering a market as an early adopter by developing a software-based measurement method for assessing digital sovereignty, a measurement method that does not yet exist in this form. The Bechtle Index of Sovereignty is designed to have business and public sector organizations to determine the maturity level of their digital sovereignty in a structured manner and derive concrete measures based on the results. The Bechtle Index of Sovereignty will be rolled out in the first quarter of 2026 and is currently truly unique in the IT market.

The Bechtle Index of Sovereignty focuses on the dimension of data ownership, technological independence and strategic autonomy. The benefits for the customers are, amongst others, that they gain transparency around potential dependencies. They can identify risks that compromise independent decision-making and action and they can take meaningful steps to strengthen their digital sovereignty over the long term.

Finally, let's take a look at our activities in the area, sustainability. We have now received official confirmation from the science-based target initiatives, SBTi insured, that our net 0 targets meet the criteria of the SBTi. Following the validation of our near and midterm climate goals earlier this year, our recently submitted long-term net zero targets for 2050 have now also been assessed and approved in line with scientifically recognized standards. With it sets net zero targets, Bechtle commits to reducing absolute greenhouse gas emissions across Scope 1 and 2 by 90% by 2050. And in the relevant areas of Scope 3, the company aims to cut emissions by 97% per EUR 1,000 of value creation and remaining emissions are to be neutralized. The key levers for decarbonization are the areas of energy, mobility and procurement. The validation of the 2050 targets underlines Bechtle's long-term commitment to climate protection and sustainability along the entire value chain.

This brings us to the outlook, ladies and gentlemen. Well, the overall economic situation remains tense. In our largest national markets, Germany and France, in particular, we are still seeing a certain reluctance among our SMB customers to invest in IT. However, we're also seeing an upturn in business with our public sector customers and higher demand in our traditional e-commerce business. During the third quarter, this upturn was particularly strong in September. And according to the first operating figures available for October, this positive trend is continuing, and this also goes for November. In concrete terms, this means our outlook in terms of business volume and revenue, we are on track with our guidance for the full year of the 9 months. However, we still need to catch up in terms of EBT.

And of course, we know that the required EBT growth of at least 25% in the fourth quarter is ambitious, indeed. But with the momentum like we saw in the third quarter that target is achievable. The swing of around 23 percentage points that we saw in Q3 is exactly the growth that would help us to achieve our guidance in the fourth quarter as well. And we've already proven several times in the past that we can deliver a strong finish. We are, therefore, confident that we will be able to achieve our EBT target within the specified range. And in this respect, we are once again confirming our guidance from March 2025.

That, ladies and gentlemen, is all we have to say about our performance in the third quarter of 2025 and the outlook for the fourth quarter of 2025. Thank you very much for your attention, and I'm looking forward to your questions.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

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