Good morning, and welcome everyone at the 2024 Nedap Capital Markets Day. It's great to see so many of you here today, and we are super excited that we can actually share more of Nedap with you today. Before we start, I would like us all to have a wave because there's camera around us, if you can see in the back.
Please wave with me to our colleagues that are joining the live stream, because we have a lot of people here in the room, but we have even more three people throughout our campus that you will be visiting later today as well, and also from our remote offices. We are very pleased that you're here to listen to our story, but also pleased that all of our colleagues are tuning in to hear the latest and greatest about Nedap.
Today we will take you on a journey. A journey of our past strategy, but also moving forward. We have several presentations lined up for that. I'll give you a few pointers. We will start with a few presentations, have a break at 11:45 A.M. If you want to refresh yourself, that's the moment, and we will then continue with a few presentations, have a Q&A.
If you have burning questions, please save them all till the end. Then at 1:00 P.M., we have a break for lunch. After the lunch, you actually get the chance to meet all these colleagues that are watching remotely. We'll have a tour where you get to experience the full Nedap campus. At the end of the tour, we come together again to connect and have a drink.
Now you may wonder, who is this person on the stage? Well, I'm Steffie. I'm your host for today. I'll take you through all these presentations, but I would also like to mention that I'm very happy to be here because I work at Nedap as well as a customer success manager for our key market retail.
I'm pleased that you get to learn more about what I do every single day. Without further ado, I think it's time to head over to Ruben Wegman, our CEO, who will dive into the strategy and the journey of StepUp so far.
A very good morning. A very good morning to you all and to all my colleagues all over the place. Just as the usual disclaimer, let's go to the real stuff. Many years ago, in 2021, we met for the last time for the last Capital Markets Day. That was a full virtual one, and I'm very glad that today we have a full physical one because experience the Nedap campus is way better than looking through a screen to a few PowerPoint presentations.
The reason why we organized the Capital Markets Day today is that in the StepUp program, we reach a certain point in time where a lot of the parts are coming together. It's a natural moment to inform the market about what we have done in the last couple of years, and it feels almost like a major release of a software package.
It is still the same software, still the same company. We have definitely done some things about the business architecture in the last years, and we included some neat new features which we want to share with you. This new release of Nedap, that is what we are going to talk about today.
But before we talk about the new release of Nedap, I want to go back to 2021 when we talk about the StepUp. We introduced StepUp. There were three starting points when we started with the StepUp strategy. The first one is that we felt that a long-term strategic plan fixed for 5 years did not cut it anymore. The world was way too volatile, and we decided that we did not want to have a plan, but a strategic process.
What we have done is, the last couple of years, that we continuously started to keep on developing and calibrating our strategy while simultaneously we start implementing it. That has been very useful because this strategic agility has really helped us to navigate the very volatile market conditions in the last couple of years.
The second one is that we really felt the need to step up. Competition was heating up, and we also saw that if you were selling hardware, you still could be the number 8 or number 9 and make money. But in a new product place where we sell Software as a Service, it is the number 1 that the winner takes all. So it is not good enough to be the number 8 or 9. You need to be the market leader. We need to step up.
The third one we saw is that we have in ourself a great way to fix this step up. If you are able to unlock all the capabilities, all the expertise and skill sets throughout Nedap, we were sure that we could make the step up. But in order to do that, unlock the full Nedap potential, we had to change a few things.
The most important thing is to be way more explicit about expectations, objectives and goals, and be very articulate about our strategy. Because if everybody knows what is being expected and what role they can play, they really can contribute to the success of the organization.
These were the three starting points when we started with StepUp 4 or 5 years ago. In the last year, we have worked to articulate, to document, to make explicit four important strategic cornerstones.
Those are the purpose, our ambition, the key markets, and the growth strategy. I will explain them one by one in the next few slides. If you talk about purpose, we are a technology company. We love technology, but especially what technology can do for people.
If we can apply a technology in such a way that people become more successful and happier in their professional lives, then we talk about technology for life. That is sheer magic if that happens. That is our purpose. That is what drives us ahead, technology for life.
This has really been helpful in our organization to explain why we use technology. It is not about the technology itself, it is about what it can do. We also talked about our ambition. If you want to create technology for life, you want to be relevant.
Because if you make great products that nobody uses, you're not very relevant, right? You cannot talk about technology for life. What we have said is that we regard market share as a very important indicator for our relevance. If you make a great product that's not being used, you're not relevant.
This is a very important step. And market share as an indicator for our relevance for customers. If this is the indicator, we want to be very relevant. We want to be the number one. We always strive for leadership in the markets we operate in.
And we are very disciplined in that. If we don't see a route to market leadership, we eventually decide to quit the business. But we can be very tenacious, and we have a long-term perspective in that respect.
This is a very important step within our organization that we say we want to be the number one in each and every market we operate in. Important step. If you look at our key markets, if you want to be the number one, you better be the number one in the right market. Because if it's a small market, it doesn't add to a lot.
What we have done, we used all our experience and expertise in the last couple of years, and we tried to figure out what are the markets which are attractive for us, where we can make a difference. And we came up with a set of criteria to define key markets. First of all, we looked at all sorts of market characteristics. Size is important. Not too small, not too big. Goldilocks, not too small, not too big. Befitting the Nedap size.
You would love to have some positive growth opportunities in there as well, positive trend. The structure of the market, we found out, is very important. If it's too fragmented and acquisition cost per customer is too high, you have to be careful. And all sort of other dynamics about the competition, how does the competition look like?
All those characteristics we've put on paper, and that's very important to determine whether a market fits the key market criteria. We also said that we need to have a competitive edge. If you don't have a competitive edge, why bother working in a market? And we found that very often our competitive edge was the fact that we were Nedap, and we could use the full Nedap power in a single market where we can make a real difference.
But there need to be an opportunity to employ our competitive edge. There needs to be a clear path to market leadership. If you don't see a way how to figure out a way to lead this market, we better spend our time to markets where we have this opportunity. And of course, logical, we also want to have a clear perspective on attractive financial results.
These criteria we used to look to our business suite a couple of years ago, our business portfolio. And we have been very disciplined and very tough. We had a tough discussion from a Nedap perspective, which business fit those characteristics, those criteria, and which not. And this has resulted that our key markets are now healthcare, livestock, retail, security. Those are the markets where we can excel.
Those are the markets we are going to spend all our time and efforts to be successful. What does that mean for UV Light controls? UV is an attractive business proposition, but does not fit the criteria of a key market. It is not a key market. For identification systems, we saw there was a logical combination with security management. Identification system has been merged with security.
Now you have those four markets. I am going to show you information which I have not shown before. This is the split. We share with you a snapshot of the turnover per key market as a percentage of the total turnover for the key markets. What I like about this is the fact that it is pretty balanced. There is not one big one standing out. It is a balanced portfolio. In each of the key markets, there is plenty of growth potential.
It is nice if you have this ambition, and to be market leader, you have identified the key markets. How are you going to grow your market? What is your growth strategy? We have worked in the last couple of years to consolidate all the knowledge, all the expertise, experience within Nedap into a structured approach going forward.
This growth strategy is called create and scale. Create and scale is the way we approach businesses, how to grow businesses and to make them big. It is focused on organic growth. We believe that organic growth is still the best growth, it is the most valuable growth, and it is what we call plain old-fashioned entrepreneurship. Organic growth means that you are active in a market, you look at the opportunities, and convert those opportunities in great products and sell a lot of them.
That takes a lot of blood, sweat, and tears, but that is the best way forward, we think. We can increase our chances, reduce our time to market, cost to market, if we do it in a different way. Instead of a lot of people trying to make a product, we said we are going to create a structured approach.
We work very hard on the structured approach. Rob will later on explain to you exactly how this methodology works like. A structured approach, and also very important, that instead of looking market group business unit per business unit, we make important investment decisions on Nedap level. Instead of investing in the best option per unit, we make the decision on Nedap level. Those can be very tough decisions.
Also, to not invest any more in propositions where people think that there is a very attractive option, but from a Nedap perspective, it is not the best option. What are the results so far? If you look at the four key markets, in each and every key market, we have established a leading position. Somebody told me that, "Tell me who your customers are, and I will tell you who you are."
I am very impressed and grateful about the customers we have in this field. If you look at retail, we talk about customers like Adidas, Puma, Decathlon. You talk about Under Armour, just to name a few when you talk about sport fashion. H&M, Uniqlo, all customers that trust us to guide them to the next wave of technology.
We almost forget, it is so logical for us to have these top-line customers, but it is good to speak out and share with you the type of customers we have. If you look at security management, security I should say, we have an enormous, impressive roster of top clients.
Airbus one, but also Volkswagen, TotalEnergies, Scotland Yard, European Parliament, all big organizations that trust us to provide them for a safe and comfortable environment. We also see that in healthcare, all the big organizations already in the elderly care, but also now with the mental health, they trust Nedap to navigate very complex situation in the care market. They all trust Nedap to help them out. If you look at livestock is worldwide active.
All the big milking parlors, except one, that is still frustrating, but like GEA, Lely, BouMatic, BECO, they all use Nedap technology to provide farmers a solution for their day-to-day run of the business. I am very proud of that. There is another thing which I am very proud of, is that when I started as CEO some years ago, when you walked around this building, this was still a factory.
When you do the tour this afternoon, on each desk you see, a couple of years ago, we still had a soldering machine, some manufacturing equipment. We had a metal shop with injection molding. Everything has gone. Everything has changed. We changed from a factory environment to a modern tech company. That is a huge transformation. I am very proud that also the type of business has changed completely.
A proof of that is that this year we reached the milestone of EUR 100 million annual recurring revenue. This is serious stuff. The important thing, it is not only healthcare. All market groups are now contributing to this recurring revenue stream. It also means that our customers have changed their relationship with us. Instead of a once-off transactional thing, they are on a continuous basis, we support them, making them successful.
This is an important step and also a testament of the success of the transformation we have went through in the last couple of years. I explained to you why we do it. That is the technology for life. I talked about how we do that. That is the create and scale growth strategy. But what is it that we do? Who are we? Is there a way to express Nedap, what we are, in a simple sentence? Rob, can you help me out? Thank you.
Thank you. Thank you, Ruben. Good morning to all of you. Well, exactly in this room, we often have the privilege to welcome clients and potential clients. I am extremely proud to show you this sheet with all those logos of national companies and international companies. Top-tier businesses striving for excellence, and they have chosen Nedap to partner with.
I often ask clients, "What is the main reason for you to choose Nedap?" They always give me the same answer. "It is your team. It is your team who understands our challenges, and they have the technological knowledge to deal with it." As you know by now, we are leading in healthcare, livestock, retail, and security. What those markets have in common is that they are all deeply rooted in the real environment, in the physical environment.
We have identified four key trends that those clients are confronted with. The first one is staff shortage, hitting both the quality and the quantity of their operations. The second one is the ever-increasing burden of compliancy with new, more stringent regulation. The third one is sustainability, pushing businesses to do more with less. Last but not least, the wave of digitization, data-driven improvements, data science and AI.
Today more than ever, those businesses feel that they have to do more with fewer resources. In order to achieve that, they need to have more information. They need to have data to make data-driven improvements. That is where we come in. What we do is we seamlessly connect the physical world with the digital world in order to make data-driven improvements. We do that with technology, and we call the technology digital twin technology.
That makes Nedap a leading digital twin technology company. What does that mean? What does it entail? First, we capture real-world data, and we make that accessible via our full stack solutions, containing sensors and connecting devices, communication technology, and software platforms and applications.
Then we enhance the data using intelligence with data science and AI to transform that data into actionable insights and suggestions and actions. With that, we support our clients to do more with less. Let me give you some examples. The first example is On.
That is a fast-growing sport fashion brand, and they want to boost their sales, and at the same time, they want to keep their inventory low. What we have done together with them, we created a digital twin of their inventory on item level throughout the whole supply chain.
They know exactly where which item is, whether it is in the production plant, in the distribution center, in the sales floor, or in the stockroom. With that information, they know how to get the right product at the right moment, at the right place, selling more with less. The second example is Dairy Dreams, a big farmer in Wisconsin in the U.S., and they manage thousands of cows.
For them, it is crucial that every single cow stays healthy. What we do is we created a digital twin of every cow, monitoring the health, telling the farmer and the staff exactly what kind of activities they should do with what kind of cow. That is all to keep the herd healthy. In short, Nedap's digital twin technology empowers businesses to unlock their full potential. What is the competitive edge of our solutions?
The first one is that we deliver a full stack solution, the hardware and the software. Many of our competitors do either the hardware or the software. Let me give you an example of security management. We deliver the full stack, meaning we do the readers, the cards, the app on the phone, the door controller, and all the software needed to manage the doors and the people flow.
With that, we ensure our clients that they have by Nedap secured stack, which is important for clients who want to have a high security level. The second competitive edge is we have decades of experience in multiple markets. Let me give you a personal experience. I used to work for healthcare a while ago, then Ruben asked me to go to retail.
We have been able to introduce the first cloud inventory management solution in retail due to the fact that we had all the knowledge and the experience and the technology at healthcare. We have been the only one and the first one to introduce that cloud, which makes us now leading in retail. The last one is the credibility of Nedap.
We have a leading position and a global reach. Our clients, they rely on us that we are able to deploy worldwide. We are active in retail already for about 50 years, and it has been tough sometimes and stressful, but we have never, ever missed a store opening. That sounds nice, and it is nice, but how do we actually execute it all? One of the things that you just heard is that clients really rely on us, and they trust us with their data.
We are often integrated in their core processes, which mean a low churn. That means that every new client we win is an additional client, and that is a good basis for growth. We call our growth strategy Create and Scale, and it basically stands for organic growth. What we mean with that is that we create innovative solutions for real-life problems.
We then scale them to leading positions that will deliver lasting value. That is what we mean with create and scale. It leans on three pillars, the CSC or Create, Scale, Core methodology, scaling by serving, and driving growth through market leadership, and I will explain them all.
The CSC methodology, Create, Scale, Core. To create and scale in one organization is a challenge, yet that is exactly what we do. We are an established company with a startup mentality.
We have put all the experience of our company and the capabilities of the past decades into a structured approach, which we call CSC methodology. It lays out when to do what in terms of how to organize KPIs, investment levels, et cetera. The first phase is the create phase, to validate and to innovate.
What we do is with small teams, we work together with a selected group of clients, paying clients, to validate whether we are solving a relevant problem, whether the market is big enough, and whether we have a scalable business model.
When the market and the technology are both ready, then we move to the scale phase. The scale phase is all about gaining market share, winning clients. More effort in how to organize certain processes and certainly also sales and marketing.
After a while, we move to the core phase, which is more focused on operational excellence. We do incremental innovations, but only if they directly have an effect on the results. The second pillar is scaling by serving the waves or the shifts. We call it paradigm shifts. Let me first explain what we mean with waves or shifts. Two examples.
What we currently see in security is due to the geopolitical tense and the pressure on compliancy, that large enterprises with offices worldwide and many people, they need another approach to manage their access rights.
For that, they wish to have a software layer above all the other systems. The adoption of such a layer, that's what we call a shift or a wave. Another example is pushed by the omni-channel revolution in retail. Retailers now want to have insight on item level.
They want to have item-level inventory. That's also a wave. We have learned to catch the right wave, because if with your experience you catch the right wave, you can grow along the wave or the shift. The third pillar is driving growth through market leadership. In essence, we are seeing market leadership as a kind of a proof.
It proves that we do the things right and we do the right things, and that we do relevant things. But it's also kind of a springboard for future growth. So by leveraging our credibility and our customer references, we see this as a springboard for future growth, and we grow then in two tracks. The first track is more clients, and more clients means adding sectors or adding countries. Or the second track is adding more value to the current clients.
As an example, Ons from healthcare, we started to build a solid position in the elderly care. From there, we went to mental care, disability care, and now even to the general practitioner care, the [Non-English content] . At the same time, simultaneously, we've built features and applications on the platform to create more value per client.
Same we did with iD Cloud. We started in a few countries in Europe, then multiple countries, and then to the U.S., so more clients, and at the same time, we built more features, but also more applications. Like we started in the store, now we do also the distribution centers. So that results in what we call a solution pipeline. Basically, this is the create scale core model, but now in the pipeline.
The first phase is the create phase, and these are the propositions, the solutions that we're currently working on in the create phase: MediKIT, Vision, PIAM, and Luna. Luna is hardware combined with software, but still all those propositions are subscription-based. So we're really investing in the business model of subscriptions.
The rest are all completely SaaS. In the scale phase, we have the propositions that we can currently grow in. That's Ons, iD Cloud, CowControl, and FarmControl. Then we have a steady baseline in what we call the core. These are propositions that are all proven and being used by a lot of clients.
Now, to prove the effect of this model. Retail. Retail delivers innovative inventory management solutions, and we are the number 1 RFID platform with the most stores connected. Security. 36% of the top 250 companies in Europe we work with.
And then healthcare, doing software for care organizations. We are the number one in the Netherlands with an impressive 60% in the elderly care. Livestock management, focusing on the world dairy markets. For professional farmers, we are the number one cow monitoring.
Trusted by four of the five largest milking equipment manufacturers and three out of the four largest genetic suppliers. To round it off, digital twin technology company we are. Our strategy is create scales, and that fuels organic growth, and it fuels our subscription business. The solution pipeline, solutions with long-term value potential. Thank you very much.
Thank you, Rob. As Ruben and Rob have helped us understand why we do and what we do, it is equally important to understand how these principles are actually realized in our four key markets. As we proceed, we will dive into each of these different key markets.
We will start with healthcare and understand how our healthcare solutions meet real-life needs within the healthcare industry. For that, I would like to first welcome to the stage Business Unit Director of Healthcare, Peter van Soolingen.
Thank you, Steffie. Let us have a look. How do these big trends that Rob just mentioned translate into Nedap in healthcare? Yes. We have an aging population. We have, every year, 3% more people of 64 years and older. If we look at the amount of people who work in healthcare, we see now open positions that are not filled of 60,000 today.
If we look at the future, towards 2030, this gap has grown between 130,000 vacancies that are not filled. What you see is the gap between the demand for care and the people are available to give the care increases.
The Dutch healthcare system is under a major pressure. The market is rethinking its operating model, and we see two big kinds of solutions. The first one is in transition to network care. That is basically a paradigm shift.
What you see is that the care is now organized in silos. Silos of organizations, sectors, and financial regulations. We envision a world of healthcare where every employee, every care professional, can work together seamlessly, always having the right information at the right time, and no silos are there. That is not enough. We also see a growing need for technology adoption.
There are a lot of apps, hardware devices, that can help in care. There should be some kind of a platform which connect them all to help the professional. We are the enabler for a new sustainable healthcare model with our digital twin technology. Our mission is create more time for care. One simple phrase that says it all. We create more time for care with a few solutions. In the first place, the Ons Suite, Rob just mentioned.
Caren, Luna, and MediKIT. What are these solutions? With the Ons Suite, we facilitate more than 1,900 care organizations in the Netherlands. We facilitate the primary care process. This means from client intake, planning, rostering, billing, patient record, et cetera. We also make specialized apps. For example, more people who live at home have complex wounds.
The wound care nurse needs some tool to manage and give the best treatment possible. We have a special app for that. We create more time for care with Caren. At this moment, 380,000 people, patients, are using Caren to structure their care network. This is a platform for patients to see when the care is, but they also can build their own care network with formal and informal care.
Informal care is, for example, the family or the neighbors or friends who participate in that care process, and it is connected to the Ons Suite. We create more time for care with Luna. Luna is an electronic day calendar. It helps people in the early stage of dementia to structure their day. It looks very simple, but it really fits the purpose.
You pick it out of the box, you put it on the cupboard, and it works. No installation is needed. It is already connected to the internet, so no Wi-Fi configuration, et cetera. It is really simple. It is a hardware product in our suite.
We have MediKIT, and we create more time for care with MediKIT for the GPs. Those are the [Non-English content] in Dutch. They can manage their practice with it. What is our position today?
We are really, really proud that we already have a really good position in the market, with 60% of the elderly care organizations that work with our suites, 50% of the disability care organizations that work with us, and 20% of the mental healthcare organizations. We have an awesome position to grow further.
If we look at, for example, Espria, that is one of the biggest organizations in the Netherlands. They have more than 15,000 care employees. They have a revenue of more than EUR 800 million a year.
The special thing about this company is that they have mental health care, disability, and elderly care under one roof, and we can help them make the transition to network care. We shape it together. What also is very special is we have almost no customer retention. Sorry. We have a customer retention of 99%. Woo.
We have no churn. Almost the same. We have mostly recurring revenue, so we have a real sustainable business model towards the future. What is our growth potential? The market in itself is already growing. In the long-term care market, in the elderly care, disability, and mental health care, the market is growing, so we grow with it.
MediKIT is still a great proposition transitioning to scale. That market is EUR 70 million big and growing. That is a great potential. It is not only that. As Rob mentioned, there is more because we want to add more value every day.
So increase the customer lifetime value. For example, what we do with Luna. We also make an app store within the suite so all our customers can buy external vendor products within our suite, so hardware and software.
There's a lot of connectivity with the suite. If we build a platform, we have that platform, we just launched it. We can add more and more to help our customers getting the care better, but also more specialized apps. For example, the wound care app I just showed you, but also a medication check to increase the medical safety and medication safety.
All new create propositions within the skill proposition, and that helps us growing towards the future. It's not only about financial value. We invest in Caren, and Caren is the platform for patients. There's no business model. We don't earn money. We see a big societal value, so we truly believe we have to invest in it. It also accounts for Nuts.
Nuts is a foundation we started and we funded, and Nuts is an infrastructure to help collaborate organizations together. It helps a platform as an infrastructure to exchange data, and this is necessary for network care. What is our strategy? In the first place, we want to keep our current customers happy.
We need to stay relevant in the challenges they face today. On the other hand, we invest in the transition to network care. For example, we just launched a new app for the evening, night, and weekend care, where care organizations collaborate together at the toughest moments.
We help them fix that problem. On the other hand, we try to expand and diversify our solutions. With expand, you can think of how to sell our products to other sectors. For example, explore youth care.
Diversify is how can we make new solutions into our current business, current markets, or maybe even explore new markets with new products. With our position, we are the best company to do this. What makes us unique in our business? The main thing is we are the only company active in elderly care, mental health care, disability care, and the GPs.
This gives us a headstart for the transition to network care. We have the most experience of all companies in doing SaaS business because we already started with it in 2002. To wrap it up, the Ons Suite is perfectly positioned for the transition to network care.
Our main growth drivers are the GPs and the mental health care. With our expand and diversify strategy, we truly believe we can add more value every day at our current customers and new customers. Thank you. I give it back to Steffie.
Thank you. Thank you, Peter. I work for retail, as I said in the introduction. I also came across Nedap Healthcare, actually. Not at work. Yes, I do, of course, browse the department to meet my colleagues, but also when my grandma needed care. I think it really makes a difference if a loved one receives effortless care with time and dedication.
When you are in such a situation with a loved one yourself, you realize that this is just something that goes unnoticed, a technology like this. It is really in the fabric of the daily lives of healthcare professionals. I was lucky enough to see that firsthand, because otherwise it is just hard to sometimes understand what it means to have technology for life and what that means for healthcare.
This weekend, I am actually lucky enough to experience another one of these examples, because on Saturday, I will start my holiday. I will take my probably backpack, go to Schiphol, and I am in safe hands.
I know that because of security. Before I started working at Nedap, I never really realized, but now I see the security solution popping up everywhere where I am. To tell you more about that, we have commercial director of security, Joost van der Willik, joining me on the stage right now.
Here we go. Well, good morning to you all. My name is Joost, and I am here teleporting you from healthcare into the world of security, because Nedap has been active in the world of security for over a couple of decades. Actually, in the late 1970s, we did the first installation of something that we specialize in, access control, in the financial sector, with the Rabobank in 1979, where we introduced Nedap AEOS as the access control standard in that instance, in the Netherlands.
We have brought more innovations to market. In the years to follow, we, for instance, being the party that introduced the first IP-based access control system into the world, and we are bringing more innovations to market, as you can see here on the screen, with a mobile credential sitting on the phone.
It is actually a collaboration together with Apple, where we have a digital access credential sitting on the mobile phone. It actually is with pride that last week, for instance, we also launched this technology with one of our customers, Red Bull, who are utilizing and benefiting on the benefits of mobile credential technology.
All in all, over the last decade, we have been building quite a significant position in the market, as you can see here on the screen. We are renowned in the field of access control, and we are part of a large community that is distributed over and scattered over the world of approximately 200 channel partners that service and procure our technology and install it at end users. Apart from that, over 60 technology partners that complement our solutions with additional systems.
In that case, if you take a look at access control, for instance, you can envision that sometimes a camera system is required. The industry abbreviation would be video management system. One example of a technology partner solution. I will use this microphone. Is it better?
All right. The position that we have established in the industry today, a global community, as you can see right here. Apart from that, we have distributed teams in a couple of specific countries, such as you can see here in the Middle East, couple of offices in Europe, but also over in the Americas.
I think Rob spoke about strong team that accounts for security as well, scattered over different regions. Strong community. The impact that we have created together with that community is something that you can see here on the screen.
It gives me a lot of pride and also energy to tell you that we are serving over 2,500 organizations with our solutions in access control in over 83 countries. The statistics that you see here on the screen is a staggering 36% of the 250 top organizations in the European Union.
It is not just limited to the European Union, it is basically a global spread. A couple of iconic names here on the screen. Those are a couple of names that we can actually publicly talk about. There are many more that due to the confidentiality of the business that we are in, we are not allowed to share, but these are some iconic examples, like for instance, Airbus was mentioned by Ruben, Unilever.
Actually, Steffie brought up the example about Schiphol Airport. I would like to make you part and take you along in this security industry and make you part of the dynamics that those security professionals that are taking care of these sites are responsible for. Picture yourself, for instance, being in charge of security at Schiphol Airport. Daily flights obviously moving in and out, passenger flows, contractors, huge complex sites at scale.
That's where we feel comfortable, but this is pretty big and maybe also a little distant. I'd like to invite you to put yourselves into the shoes of a typical security manager that we talk to on a regular basis. Those professionals are responsible sometimes for organizations that, for instance, have 50 buildings scattered over multiple countries, with sometimes even more than 20,000 people that are on the payroll.
Then I have not mentioned, for instance, the number of contractors that is part of that site. There's huge dynamics in the world of access control and, in that case, in security. What we see is that there is a paradox. There is a shift happening in the industry where we see pressure coming from three sides. As you can see here on the screen, convenience, security, and compliance is pressing on this professional.
Their expectation is that on these three elements, that they step up and take responsibility. The organizations that they are serving, first of all, are demanding convenience in usage, and not just in usage, but also in maintenance. The pressure on labor also accounts for the organizations that need to take care of security. Second is an increased pressure on security itself. The threat landscape is still on the rise.
There's more complexity. Sometimes we make the statement there's creativity in crime, which has an impact on security. Last but not least, is the increasing pressure on compliancy. There are more rules and regulations. A couple of examples are, for instance, introductions of the Cybersecurity Act, Cyber Resilience Act, NIS2, DORA. These are all examples of rules and regulations that have an effect on this security professional that is sitting right in the middle of this triangle.
What we see is that the security professionals that we talk to place a growing emphasis on convenient solutions that they're requesting. Apart from that, there's a growing emphasis on the ability to prove compliance with the rules and regulations, and there's a growing emphasis on responsive and adaptive security solutions.
I've been telling a little bit more about the trends and the underlying trends, and we see that the security industry is demanding digital twin technology to provide an answer to that level of tension and the triangle that you see on the left-hand side of the screen. How do we do that? The way how we solve this situation is by bringing in a full solution stack that helps these security professionals to transfer those environments to a cloud environment.
It consists of three parts, and I'm going to take you through them also from a perspective of the security professional. Access readers, access control, and PIAM. PIAM stands for Physical Identity and Access Management platform. Just remember that abbreviation. The access reader layer is most probably the thing that is familiar to you, is the interaction between the person and the door.
As soon as you approach a door, there's either a physical or virtual identifier that you present in order to get access to a certain environment. Convenience, compliance, and security, and the introduction, for instance, of Nedap Mobile Access is a way how we pave the way for the future for the security professional. This is the first layer of a typical access control and security solution.
The second layer is a little less visible to the eye of the people that actually pass through the door, but is the layer of control, access control. Typically regulated by a door controller that decides and determines the behavior of the door, and the behavior is who can enter at what time to a particular space.
This is basically still the physical world, and the physical interaction between the physical world and the digital world. On top of this, we have added a new solution, which is the PIAM solution that we have introduced sometime back, and have also already deployed at some customers, which is basically a virtual representation of the spaces that the security manager is responsible for. Let us go back to the example of the responsibility of 50 buildings, more than 20,000 employees.
What PIAM does is it virtualizes all of these physical spaces into a virtual representation, and it maps them to the persons that have the right to gain access to a particular space. 20,000 people, 50 buildings, quite a complex task. It is something that we can fix. With that and with that solution stack, we are uniquely qualified in the industry to go beyond something that we call access control.
Basically, our perspective is to move beyond the door, and make access really about people flow within those organizations in order to make sure that we create environments where people can thrive and where they can contribute to the organizations that they are part of. The growth potential that we see in the security industry is, first of all, that we see growth opportunity being part of the community that we have built.
All in all, we see the channel partners, 200 channel partners that we can leverage, and we are benefiting and building on the annual growth of the industry, that is up till 2028, projected at least to an annual growth of between 5%-7%. Apart from the organic growth, there is an increase that we can create at the existing customer base.
I spoke about the 2,500 organizations that basically require the transition towards a cloud-based environment, and we can support those organizations to make sure that we make that move to a secure, safe, and compliant, and convenient reality. Last but not least, we have identified over 1,500 organizations with a workforce of more than 5,000 employees that are not yet part of our customer base.
We see ample opportunity to expand our position with on-premises and the SaaS solutions that are grouped together in the solution stack that I spoke about before. All in all, bringing that to, at least from my point of view, to my end, there are a couple of key takeaways that I would like to share in this audience.
First of all, Nedap in the security industry is part of a growing market that is supported by the paradigm shift that finds its root cause in the triangle, where security professionals are in need of secure, convenient, and compliant solutions.
Second is that Nedap has a strong reputation in the market. First of all, on the back of the 36% of the top 250 European organizations that we are serving, as well as the large community that we are part of.
And with the full stack solution, we enable the transition to cloud, and we are uniquely qualified to bring those large organizations to this new reality. With that, I'd like to hand it over to Steffie.
Thank you. Thank you, Joost, and I personally love it that I can nowadays just browse the office safely with my mobile wallet. That's just a minor thing probably for you, but a big thing for me. As I say walk, that's actually a cue to have a break, because I think it's time for everyone to stretch their legs for about 20 minutes until we come back for more presentations.
We'll be back here at 12:00, and there is coffee and tea somewhere. That way, we will help guide you. See you all back here at 12:00. Welcome back, everyone. I hope you are excited for the next part because I sure am. Like I said, I'm working for retail as a customer success manager. Yesterday, meeting with Tendam, big Spanish retailer.
This afternoon, Hugo Boss, tomorrow, Foot Locker, and I would love to share lots about what I do. But I'm not the right person to do so today, because today we have invited someone special for that. Business unit director of retail, Oscar van den Broek.
Thank you, Steffie. I'm still looking for my clicker. Thank you. Thank you. All right. Welcome. The retail sector is navigating major challenges. First of all, overproduction. It is estimated that about 30% of all the items that are produced in fashion and sports is never being sold. That's a lot.
That's not only bad for the environment, but it's also costing retail about EUR 200 billion a year. Secondly, the cost of doing business is increasing. As you can see here on the left side, bottom side, labor costs increasing 4% or 5% year-over-year.
Warehousing costs, logistic costs, leasing costs. At the same time, as you can see in the middle, the inventory losses due to, for example, theft, is sharply increasing year-over-year. A third challenge is the customer is demanding a seamless omnichannel shopping experience.
Whether that is online or in the store or everything in between. In the store, people do not want to queue up anymore and wait for checkout. They simply want to grab the item, scan it with their mobile phone, pay, and walk out. It is a big change. As you can see here on the right bottom side, BOPIS, one of those omnichannel concepts, buy online and pick up in store. You see those services increasing year-over-year.
Lastly, European directives. Europe is one of the frontrunners in terms of sustainability legislation, which is a very good thing. It also forces retailers to report on supply chain transparency and item-level traceability. So consumers need to know where the products were produced and what journey it took throughout the supply chain. Retailers are looking for ways to navigate these challenges in a profitable way.
We believe that digital twin technology like RFID can help them. So retailers are looking for ways to sell more with less, with better stock allocation, integrated supply chains, but also with automation in the supply chain as well as in the store. This is driving the rapid adoption of digital twin technologies like RFID. We are doing this with the world's largest and leading retailers and brands.
I am very proud of this customer list. We have been able to do so because of our strong footprint that we grew over the past 50 years, starting with traditional security at those beeping gates at the exit of the store.
Many of those customers trusted us, H&M, Decathlon. They have been our customer for decades, and we grew together with them, and they trust us also in the journey of RFID. Decathlon, I personally know very well.
12 years ago, I was the key account manager for Decathlon, and once they decided to go RFID deployment, we were the partner to do that together with them. Steffie mentioned Hugo Boss. We are currently in full deployment mode with them all across Europe. Another example, G-Star and Puma.
They have been customers for a long time, but we have recently been able to increase our partnership with them and expand on the amount of modules we are selling to them. So we are adding more value to existing clients.
They choose Nedap simply because of our team. Our team is able to build long-lasting and strategic partnerships with them, building intimate relationships, so they trust us. Next, they also believe in our vision of providing a factory-to-shopper inventory visibility solution. So what do we offer them?
As I mentioned, we are looking to provide the whole factory-to-shopper digital twin ecosystem, combining both software as well as hardware to provide real-time inventory visibility. We offer this in a SaaS package complemented with hardware solutions. We distinguish three layers.
On the bottom, you see the retail supply chain, from factory to warehousing and distribution, to omnichannel sales in store, and then to the shopper. We distinguish three layers. First one is the data and capture, where we make a digital twin, a digital copy of the physical products throughout the supply chain, and we track and trace it in almost real time.
The second layer is improve and automate, where we automate all the relevant processes in the supply chain as well as in the store, for efficiency, for accuracy, and for speed and convenience.
And lastly is the insights and decision-making layer, where we are using all those data points, which we gather along the supply chain in the store, to provide meaningful and actionable information back to the stores as well as to their headquarters for them to make better strategic decisions. Let me give you a couple of examples.
On is one of the fastest-growing athletic brands in the world. One of their early investors is Roger Federer. I am sure you know him. And what we are doing with them is we automatically verify all their shipments from the factory, which they ship out to their distribution centers.
Increasing efficiency and increasing accuracy. Another example, H&M. Here you see a tunnel reader in one of their distribution centers, and we automatically mark all their shipments for that buy online and pickup in-store process, as I just mentioned.
Once the customer goes to the store and picks up their purchased item, it does not generate an alarm when they exit the store. Now, for Lululemon, we advise in real time what to replenish from stockroom to sales floor, so they always have the right size curve available for the shoppers to buy.
And what we are also doing with them is we help to reduce overstocking by making that store stock available to be sold online in real time. Two weeks ago, I was in Vancouver visiting them in their headquarters, and we also did a joint store visit.
And one of their store associates told me and said, "If you are taking away this application, I am sure I am going to quit my job." And we laughed about it, but it truly made me realize that, yes, we are making a true impact on people's professional life, making it easy, more fun, more convenient. With G-Star, we are reducing queuing at the checkout with G-Star up to 30% by automating the checkout process.
You simply put your items on the desk, it automatically adds up, you pay, and you leave. No need to barcode scan all those separate items. Reducing up to 30% of checkout time. Lastly, Under Armour. We invisibly secure each and every individual item at the exit of the store. But what we also do is we consolidate that data across all their stores and provide that information back in trend analysis to their headquarters.
For example, high-theft items, high-theft hours, so they can plan their loss prevention strategy accordingly. And it is our goal to sell the whole, the complete factory-to-shopper solution, because we believe that that is where we can add the most value.
We often start with one of those solutions, one of those applications, and then we start to up and cross-sell into multiple solutions. Currently, Nedap iD Cloud, is the leading SaaS platform, among RFID users.
As you can see here, still a large portion, 33%, has self-built software. For example, Nike decided to build their software themselves back in the days. But we believe that is something from the past, as we see, most of the new RFID implementations are with software vendors like us. 35% of the market is Nedap. And Nedap iD Cloud is bigger than competitor one, two, and three altogether.
So, if we look then at our future leading position, we believe that in the next five years, RFID adoption will double. With the highest adoption rate in the large retailer segment, so retailers with more than 1,000 stores. As you can see in this image, almost 50% of those large retailers have already adopted RFID, and we believe that the adoption rate will be highest in the next coming years in that segment.
And that is exactly where we are going to play, and that is exactly where we are going to win in the coming years. We are not only focusing on increasing our market share, we are also focusing on increasing the value per customer. So selling multiple subscriptions to that same customer. Very important to us. A few words on our strategy.
So, we will focus on strengthening our market leadership by focusing on those large retailers in North America and Europe. Secondly, we are providing the whole factory-to-shopper digital twin RFID platform, where we focus on automation in the supply chain and in the store, and we are focusing on the third layer of data and insights.
And lastly, we are focusing on increasing the customer lifetime value by maintaining our high retention, currently more than 98%. We recently renewed the contracts with Lululemon, with Carter's, with River Island, with H&M. We are focusing on volume growth.
We recently signed Woolworths, so adding more customers to our platform. And lastly, value growth, so cross and upsell, like we did for example, with Puma and Under Armour. If you are back in the car or the train later today, I want you to remember three things.
First of all, RFID adoption will double in the next five years. Secondly, Nedap is well-positioned to capture that growth because of our strong team, our established footprint, and our unique software and hardware capabilities. And lastly, we focus on market leadership and providing a factory-to-shopper digital twin RFID platform. Thank you.
Thank you, Oscar. And now, I feel like we all live and breathe retail, just like I do. But we are going to make a big switch, because we are going to switch from retail all the way to livestock. And, well, you can imagine. Fancy looking retail store to a farm. Well, you may not guess it, but I grew up on a farm, so I am sure that we can all make that switch. And we have someone here who will help us with that. Maarten Idink, business unit director of Livestock.
Okay. Thank you, Steffie. Also thank you for taking away my introduction, actually, because I wanted to say more or less the same. We are moving from retail now to Nedap in livestock management. I think, I know for sure, it is the only business unit within Nedap where our technology not only touches the lives of people, but also that of animals.
As Steffie, I also grew up on a farm, so that fact made me incredibly proud. The global dairy challenge. I think it is good to understand that to feed the growing world population, milk demand will rise, it will rise significantly. It will rise with 50% in the next 30 years. To meet that rising demand, milk production in the dairy sector needs to grow also significantly.
We need to grow our output, but we also make sure that we simultaneously lower our carbon footprint to keep our planet healthy. That poses a huge challenge on the dairy sector. We believe, we are actually convinced, that digital twin technology plays a vital role in solving that challenge.
Some of the drivers have already been mentioned, of course, the main drivers we see in all the key markets, and livestock is not an exception. Labor shortage. How do we find, how do we attract and how do we retain people and skilled workers in the dairy sector? How do we meet up with compliance and ongoing pressures on animal welfare?
How do we keep up with pressures on sustainability, not only to lower our carbon footprint or to lower the CO2 equivalent per kg of milk solids, but also how do we make sure that farms are sustainable and can be passed on to the next generation? Those drivers combined made the dairy farmers are rethinking their operating model. Farms are getting bigger.
Farms are consolidating. As you can see below, the number of million of cows living on professional farms is growing, will double in the next 30 years as well, moving from around 50 million right now to 90 million in 2050.
Farmers want to automate repetitive tasks, of course to answer the labor shortage. There is a constant need for more real-time data to make informed decisions. All in all, this leads to a growing cow monitoring adoption.
Actually, this accelerates at the moment we speak. At the graph below, you can see cow monitoring adoption is more or less around 30% on professional farms already. That will grow in the next five years to 50%, which is a growth of 70%, which is remarkable. What do we do with cow monitoring?
By monitoring cows 24/7, we create a digital twin of each individual cow, so we can reveal her unique needs and also her performance. Ultimately, it is about knowing your cows to manage your herd, to optimize your farm. I think this is a great example. This is Vander Woude Dairy in an extremely competitive market, California. It is a 6,000 cow herd over three locations, and they bought Nedap CowControl last year.
For me, that was also, once again, that we knew that we were on the right track, that we also have a great technology for that large herd segment. I think also Simon Van de Woude, which is a third-generation dairy farmer, he said to us, and I think it was spot on, "Sustainability, to me, equals efficiency. It equals doing more with less. If we keep a cow healthy, she's going to produce more with less inputs.
Through the adoption of Nedap CowControl, in this case, we made significant strides in creating a more sustainable operation." That is exactly what drives us every day. Improving life on the farm is what we do, not only for people, but also for animals. We help farmers to optimize the performance and well-being of individual cows, individual cows, while minimizing workload and resources.
Why do I emphasize on individual cows? Because that is what we believe in. Let cows be cows. Focus only on those cows who really need attention, and let the rest of the herd be a cow. Let them eat, let them ruminate, let them rest, let them produce milk.
How do we do that, improving life on the farm? We have two core solutions, CowControl and FarmControl. CowControl centers around four key insights, health, reproduction, productivity, and operational excellence.
The data derived to get to these insights mainly come from two types of sensors, our SmartTags, both the ear and the neck, and of course, our SmartFlow milk meter. What you can see here is a representation of the user interface. A farm sees when a cow deviates in her normal behavior. Normally, there is quite a stable line.
When there is a deviation, when she behaves differently than normal, then in this case, you can see there is a sudden drop in eating time and rumination time, and a peak when a cow is more inactive than normally. This triggers an alarm to the farmer. Please check out this cow, because there is something going on, probably a digestive issue.
On the right or your left, you can see a digital twin of a parlor, in this case, a 60-stall rotary, where you can see all the cows being milked at the platform and their real-time milk yield. Again, when there is too big of a deviation compared to her previous milkings, it triggers an alarm. This case, you can monitor these cows 24/7, and you are alerted when there is something going on. FarmControl.
FarmControl has everything to do with identifying a cow and connected devices to streamline the processes on farm. FarmControl makes it possible that our insights become truly actionable, because it is nice that you have an insight that a cow is deviating, but ultimately, you want to treat the cow, you want to find the cow, or you want to give her some additional concentrate feed to boost her energy level.
We do that with sorting, so you can sort a cow away from the group, so the rest of the group is not disturbed, or you can do that with locating, so we know the real-time position of a cow in the barn. Here you can see, in the user interface, what every farmer sees when he gets up in the morning. He looks at his phone, or he opens the desktop, and he sees work list.
What cows do I need to check today? We make that truly actionable to showing what the real-time position of those cows is in the barn. When you have a 100-cow dairy, it is not too hard to find those cows. But when you have 2,000 or more cows, trust me, this system pays off in less than 2 years.
So what is our position today? I think it was already mentioned by Ruben and I think also Rob. Market share is a clear indicator of our relevance. With more than 30,000 farms connected and with 5.5 million cows connected and monitored daily, we hold more or less a global share of 40%, which makes us the global market leader in cow monitoring solutions. How did we get to that position? First of all, by a scalable technology suite.
We have, and I am proud to say that we have the best-in-class hardware and integrated on-premise but also cloud-based software. All our solutions are designed for scale. You can scale, so you can meet any farm size, but also any segment.
Because a farmer in New Zealand in a grazing situation or in Ireland in a grazing situation demands something different from our system than a robotic farm in the Netherlands with 120 cows or on a large farm in the U.S. or in the Middle East, for example.
But our solution portfolio is made for scale. So you have one PPU, a processing unit on a farm. You can add a number of readers and antennas to scale almost limitless. Ultimately, I think what our portfolio is all about is we have an unmatched breadth, a range.
We have unique features like, for example, multi-sites, so that we can also answer the demand from the really large, progressive dairy farmers in the U.S. buying multiple sites. We have cow locating, which is unique.
But also, our accuracy is far beyond what our competitors can offer, both in sorting accuracy, but also in the accuracy about our health and reproduction status, and we are the most reliable product.
We have the lowest failure rates in the market, and we have the highest average lifespan of our products. This is what makes us truly unique. Next to that, what is really different compared to our main competitors is that we have a distinctive route to market. Together with the leading partners in dairy, we have a global reach. We have a global network of leading partners.
We can reach 75% of all the professional farmers worldwide, which I think is still impressive. But we also can offer unique value propositions to meet those individual needs of every farmer. Because if we sell CowControl through GEA, for example, it is integrated in their parlor or in their robot. But if we sell the same product, CowControl, through Alta, a leading genetics company, their solution portfolio looks really different.
And their offering is combined with, for example, a herd management program with their genetic services, but also their colostrum. So we really can tailor through our business partners to the specific needs of our end users. To give, I think, a prime example of what makes us really unique is GEA. We have a global reach through GEA.
They almost have the entire technology stack from us, from Nedap, integrated in their portfolio. We are doing business for more than four decades, and I think that tells a lot. Reliability, not only in our products, but also in the way we do business. Again, I have heard it all before today, it is about having a great team.
Trust me, these business partners, they also sometimes compete to each other on the same farm. We have to be really disciplined in our relations with our business partners to keep this model up.
We have been the only company in the business able to do that. Last, but definitely not least, talking about a great team, we have local entities and presence in all the main dairy regions, from North America to Latin America. In Europe, of course, our headquarters over here.
We have Shafiq in the Middle East. We have Surapp in India. We have a dedicated team in China led by Andrew, and we are opening up now our own entity in New Zealand as of January 1st, where we have already a team of four people now being active in a great and growing market.
Three growth drivers, and I think maybe despite a potentially somewhat negative sentiment, or maybe the dairy sector, or looking at also fueled by a delay in our revenues this year, trust me, this market will grow, and it will grow big. It is already huge and will grow even bigger. Our total addressable market, and I refer back to the very first slide, is growing.
The total number of cows on professional farms, as of 300 million dairy cows living on the planet, 50 million are housed on those professional farms, but that number will grow to 90 million in the next 30 years. Adoption of cow monitoring is accelerating as we speak, from 30% now to 50% in the next five years. There is a lot of potential here.
Growth of reach. We already have an impressive 75% reach, but we think we can even extend that further. We do that by closing gaps in reach. In some of our focus countries, there are still some gaps in reach where we think we can. Of course, we always ask our global business partners first to enter into those markets, but if not, we should find a local business partner to really close that gap.
Next to that, we are thinking about adding potentially new sales channels because sometimes, alongside, of course, our genetics and milking partners, but sometimes, and I think the best example of that is China, our global business partner were not positioned well enough for us to lead as our route to market.
We moved to milk processors, and we added them as well to our business partner network. Now we work with the leading business partners in China as well. Three, growth of value. We can grow our revenue per cow by extending the value of our solutions. Some farms in our install base, they use the SmartTags. They should also use the SmartFlow. With that, we can multiply also the number of insights we can sell.
Next to that, we want to grow our revenue per cow by increasing the lifetime value of our solutions. We do this mainly by transitioning from hardware sales sold one-off to solutions as a service. Our strategy is pretty straightforward. Both our strategy and organization are built around two pillars: Win today, anticipate tomorrow.
Winning today is crucial. We have to find, and we have to realize the scale, and we do that within our dairy organization. Operations, R&D, commerce. What I typically like about our dairy organization is that we are really rooted in dairy.
Everyone within our team has a strong affinity with the sector. They know what dairying is all about. By adding all those local teams, we really have boots on the ground, and we know what is happening in those local markets and what those local needs are.
We are built for scale. We have invested pretty heavily in our R&D team. It's agile, it's market driven, and we are building actually a production facility, which is state-of-the-art to produce our SmartTags. If the growth comes, trust me, we are ready for it, and we will pick it. We grow and monetize our position along two tracks.
We leverage our reach to grow our installed base and market share. We have a unique reach, but we also want to unlock the untapped potential within that reach. I think we can be more successful with our current business partners than we are right now. How do we do that? We elevate their knowledge and confidence levels by letting them go through our training programs, the Nedap Academy.
We support them locally with application support and also in the sales process to really be there where the action happens, and of course, by tailored marketing campaigns in those regions where we really want to build a strong Nedap brand. Two, leverage and expand our portfolio to increase the revenue per cow.
As said before, move from one sensor to multiple sensors, SmartTags plus SmartFlow, and maybe some new sensors out there as of next year. With that, we can multiply the number of insights we are selling right now.
I think that is unique, and it's also really hard because we have the ability to combine data from different sensors, and we can come up with unique insights which simply cannot be met by our competitors because they don't have those sensors.
Next to that, we want to transition from one-off sales to hardware sales, giving us ongoing possibilities of upselling and cross-selling. Also, anticipate tomorrow. We are creating at the same time as we are scaling, and I think that's a big challenge, as Ruben already told that as well. We have a dedicated expansion team.
What they do is they identify and they validate future growth opportunities from three perspectives as either new technology, new business models, or in adjacent markets. I think a prime example of this is our ongoing investment in computer vision. This is more a teaser for this afternoon because Roxy, my colleague, will tell you a lot more about what this is all about during the tour this afternoon. Here is already a small sneak peek.
My key takeaways, there is a paradigm shift going, rising milk demand, farm consolidation, and labor shortages are accelerating cow monitoring adoption, creating an already huge but rapidly growing market.
We are, as the global market leader, uniquely positioned together with our distinctive route to market and scalable technology suite to capitalize on that growth. We are already set to leverage the next wave in technology to solidify our market leadership for the long run. Thank you, and back to Steffie.
Thanks, Maarten. Now we know what we do, why we do it, and we got a lot of insights in how we do it. As a next step, I would like to invite our CFO, Daniëlle van der Sluijs, to the stage to talk about the financial impact of what we do and the sustainability journey that we are on. Daniëlle, over to you.
Thank you, Steffie, and good afternoon to everybody. We are very pleased that you all joined us to share our story, and give a bit more perspective in what Nedap does. Let me take over of giving a financial perspective of our activities of the last year and our ambition going forward.
We have been working in the last year on the implementation of our StepUp strategy, where we have created focus, but also strengthened our organizations and our positions in the various markets.
As Ruben already shared, this is my first slide. As Ruben already shared, that has brought us to the position that we have a very balanced portfolio of key markets. As you have seen in the individual presentations, that in each key market, we have leading positions and growth potential.
During the transformation of the past four years, we have demonstrated an organic revenue growth of annualized 8% compound annually. Next to that, we have increased, in this period of transformation, our earnings per share with 11% compound annually as well in absolute terms. Our strategic focus, our strategic drivers, have driven this organic growth in the past few years, and it is also good to realize those were years with a lot of volatility.
With COVID, component shortages, catch-up deliveries, stocking, de-stocking of the supply chain, and not to forget, of course, the geopolitical developments that we see. In this revenue development, there is also an impact from our conscious decision to scale down certain positions, like certain solutions, like livestock pigs, as well as staffing solutions.
The total revenue of these scaled-down solutions was, in 2019, EUR 21 million, and has reduced to EUR 17 million in 2023, and will further reduce in the coming years. At the same time, we were able to organically grow our recurring revenue and reaching the milestone, as Ruben already shared, of EUR 100 million annual recurring revenue this year.
The recurring revenue has grown in that period that I shared, so 8% total revenue compound annual growth, and our recurring revenue has grown with 17% starting from 2019 towards last year.
The growing share of this recurring revenue is a result of our strategic focus on more recurring business models, as you have seen in all the four key markets. The growth of this recurring revenue will support us in getting more stability and predictability over revenue development.
Because this recurring revenue is revenue coming from subscriptions on our software as well as licenses. If we look then at this year, 2024, that is the last bar that you see on this graph. We have grown again our recurring revenue with 20% in the first half year, and as you have been able to read in our Q3 trading update, also in the third quarter, 20% growth of our recurring revenue compared to last year.
That growth is offsetting this year the lower revenue from the non-recurring revenue, which we are experiencing this year to the, in our view, temporarily slowdown of the dairy market worldwide.
You can see this in this picture very clearly, the impact of this non-recurring revenue, the volatility of the non-recurring revenue, and the stable growth of our recurring revenue in the last years.
On our operating margin, we see a postponed effect. We realize this. We have invested in create a scale solutions in the last year to capture on the market momentum, the market momentum that you have been experiencing in the individual presentations of the key market directors.
Let me explain with you how this results into our P&L in the last years by a very summarized profit and loss. To start with, the gross margin, which is our added value in relation to the total revenue. Our gross margin has increased from 63% in 2019 to 69% in 2023.
This growth in our gross margin is driven, of course, by the increased share of a recurring revenue with an higher added value, but also with a more qualitative non-recurring revenue, because we're focusing more on solutions with higher value.
We've consciously decided to invest this increased margin back into organization by increasing our level of research and development and maintaining the current high level of 18% of total revenue in research and development investments. It's also good to realize that we are very conservative in capitalizing on those R&D costs.
A lot of the R&D costs go directly to our P&L because we really want to make sure that we're doing the right thing, and we really want to make sure. A lot of the R&D costs are also development costs. I will share with you later. To increase our commercial impact, as Oscar was saying, as well as Maarten, making sure that our presence to customer increases in the last year to capture again on the market momentum that we see in the different key markets.
We've grew our teams in the U.S., we've grew our teams in New Zealand, as you've been seeing. As said, a part of this increased growth of our gross margin has been invested back in our R&D, invested back in the commercialization of the organization. There is an effect of the scale-down solution that we're working on at this moment.
Scaling down Livestock Peaks as well as staffing solutions is impacting our P&L at this moment. There is an effect in 2023 of 1%, which will phase out in the coming years. It's also good to realize that the investments that we're making are in solutions with a recurring revenue element. We're moving towards recurring business models, and the development and the commercialization of these kind of solutions are focused on creating long-term value.
To give you a little bit more detail about the growth of our last years in our teams, because that is the most important driver of our increased costs. Just going to show the total picture. Here you see our growth from 2021- 2023.
Knowing when to scale and where to scale requires really close monitoring of your market developments, as well as tuning the organization. That's exactly what we've been doing and what we are doing at this moment. At the same time, it is very important to attract this talent to fuel our growth ambition in the various key markets.
We are very proud that we were able to really attract talent in the last years, who really choose for Nedap because of our culture, because of our entrepreneurial culture, and because we are making an impact in the markets that we're active, and we're developing their knowledge and their expertise. Next to our growth in our R&D teams, as you see, almost half of our staff is working on research and development.
A lot of developers are working on our platforms, making sure that they keep the value that they're giving at this moment to our customers and keeping our low churn low. That's very important.
Next to that, developing new features on those platforms to enlarge exactly the impact that we have in the market. Our commercial teams indeed are increasing our customers' reach, as I was already saying.
They're all watching now, so we're very proud to have them in our teams. That brings me to our ambition going forward. In the midterm period that we have been sharing, we are targeting in high single digit organic revenue growth. We are targeting an increased operating margin towards the mid-teens.
It's good to mention that this is not instead of the guidance that we already gave, that we're moving towards 15% by 2026. But it's important to realize that we expect this growth going forward.
What is driving this organic revenue growth that we're expecting? To start with, if you have seen in the individual key market presentation, we have very solid positions in key markets who are growing in themselves, like we see in livestock with the adoption of technology in the farms, but also in retail with the RFID adoption.
Given our position in that market and the expected increased adoption, driven again by the market developments that we see in those key markets, we are anticipating growth there from those key markets. Next to that, as we have been seeing, we are able to surf the wave in certain key markets. For example, in security.
We have a very strong position in security, and we are able to surf the wave in getting more convenient, more compliant, more secure with our PIAM solution, for example. That's another driver of our revenue development.
Last but not least, also our market leadership, what you have seen in healthcare in the presentation of Peter, giving the market leadership position that we have in healthcare, in the care organizations. It's very important that we innovate on our digital twin technology to help the care sector move further.
This growth is organic growth, and the fact that we're growing more with recurring revenue, with a relative higher margin, as well as being able to leverage on a skilled organization, is going to support us in our operating margin targets. It's also important to realize, what is our capital allocation framework?
Our capital allocation is really focused on creating long-term value for all our stakeholders. To start with our customers. Our customers trust us at the core of their activities, and it's very important for them in order to support the long-term commitment that they got with us, that we have a very solid financial position so they can trust that we will be there to support them in their challenges.
Next to that, for our employees, it's very important to support, let's say, the entrepreneurial culture that we have, that the value that our employees create are partly also shared with them. This is really supporting the engagement of our teams. We've been growing in the last, let's say, 10 years, top of my mind, into a position where all our employees hold a share of 3.6% of the total company, which is in the top eight of our biggest shareholders.
Again, our employees are creating the value for our customers and for our organization. Then to our shareholders, we have said, and we are saying that the cash that we do not need in order to invest for the long-term growth and the cash that we need to have our solid financial position, we will pay out to our shareholders.
Those who know us for a longer period, we have a track record of a relative high payout ratio. Our growth is about organic growth, and we're not looking for M&A opportunities actively. If there is an opportunity within the key market that will really support us in our position, like we see in MediKIT that we acquired last year to support our healthcare key position there and support us in this transition to network care, we will do that.
We will not actively pursue because we have enough opportunities in all our four key markets to grow organically. From the financial impact that we have, also to the financial value that we create, also to the societal value, this is our sustainability journey indeed, as Steffie were mentioning. Actually, our sustainable impact is first and most through the solutions that we offer to our customers.
If you heard the stories in healthcare supporting, let's say, sustainable healthcare system in the Netherlands or livestock, creating more milk with less carbon footprint, but also more on animal welfare within livestock. With retail, very clear example. With our solutions, we are able to lower the total inventory that you see in the supply chain in fashion retail.
Next to the impact for our customers, we are running our operations as well as the development of our products in a way that we can reduce our carbon footprint as well. We have committed ourselves to the SBTi, so the Science Based Targets initiative, to lower the impact of our products and our operations. That's mainly in the use phase of our products. We have really committed a target to reduce the impact in the use phase of our products. Last but not least, our employees.
As I was saying, they're creating the value for our customers and for our organization. Making sure that they keep this high level of technological knowledge and skills, it's very important that they keep on developing themselves. We think that's a very important role of our sustainability journey. To summarize, we have shown in the last years of volatile years from a world perspective, I could say, an organic revenue growth of 8% on an annual basis.
We've been able to increase our recurring revenue and achieve this year the annual recurring revenue milestone of EUR 200 million. Our EBIT margin, our operating margin, we see a postponed effect because we have invested in R&D and in the commercial teams, and there are still some impact from scale-down solutions which will phase out going forward.
Our sustainability journey is integrated in our organization. You have seen our midterm guidance, and our capital allocation is driving long-term value for all our stakeholders. Thank you.
Thank you, Daniëlle.
Thank you.
We have covered a lot this morning. I bet there are already loads of burning questions. Before we start with the Q&A, we would like to have a wrap-up with key takeaways from our CEO, Ruben Wegman.
We want to be absolutely convinced that you understand the key takeaways. We have been trying our best so far. I can do that at the end of this presentation. Fortunately, after that, you can ask all the questions you want to have. Of course, we have plenty of opportunity during the tour, but I definitely want to make sure that when you leave this organization today, our campus, that at least the following five takeaways are absolutely clear.
First of all, we are the leading digital twin technology company in four markets. That is what we do. Nedap in 2009 still had 11 different market groups. Now we are a digital twin technology company. That is what we are, active in four markets, four key markets where we have a leading position, a wonderful roster of key customers that trust us to take them forward.
That is a very powerful situation going forward. The strong customer base really sets us apart when we introduce new technology in the market. If you have a lot of paradigm shifts, trust is a very important thing. They need to trust us to do new things, experiments, to make sure when there is a new paradigm shift, you are the first to take action.
Create a skill. Instead of every lot of entrepreneurs all getting products to the markets in their own way, we have a structured approach. We have seen that we made a few mistakes in the future. We still have this rule within Nedap. You are still allowed to learn from your own mistakes, but it is straight out stupid not to learn from the mistakes other people have made before you. This is really helpful.
It's helpful that we need to be very critical in the create phase. But once we scale, we were too modest. The big lesson in the last couple of years, if you want to be the market leader and you have a proposition with traction, you need to invest ahead of the curve. That's exactly what we have been doing, and that's exactly that has resulted in the leading positions.
Also, this is proof. Proof of what we have been doing in the last year, this transformation that has been successful, that we moved from selling hardware once off. We have this subscription business and EUR 100 million.
The only thing, it's difficult to explain. It's not difficult to explain, but you have to understand that the dynamics of this market for this turnover is completely different. That's something that you see in the short term.
If you create a successful platform where you want to gain market share, you first need to do the investment, and then you need to reap the rewards. This is what we have been doing the last few years, and the good news is that we have seen way more opportunities than we anticipated.
So now, the good thing is that instead of having just one or two contributing to the annual recurring revenue, we have now all the market groups having a full-fledged offering of Software as a Service.
These are the five most important takeaways, but I'm quite sure you have way more questions. So can I ask my colleagues to come over at the stage? Steffie, I believe you're going to handle all the questions.
I'll do my best. Yeah. So take a minute to get comfortable on the chairs as I give some guidance on how we're going to approach this Q&A. We have our wonderful colleagues, Sitsa and Sandra, walking around with microphones. If you have a question, you can raise your hand. If the microphone is near, you can stand up.
Please share your name and company with us so that we know who you are and then ask the questions. Then, we have Ruben, CEO, Daniëlle, the CFO, and Rob, CCO, to answer all the questions that you have. I think that's all you need to know to get started. So who is going to be the daring person that asks the first question? Someone raising a hand in the front. Please stand up, name and company, and then the questions.
Good morning. Willem Burgers, Noesis Capital. One question just as a start of the transformation process from the market groups to four, where two are excluded as of now. You mentioned that briefly, the UV part and then Identification Systems, which will be put together to Security, I learned. But what will be the effect going forward? UV and lighting, what will be the future? I didn't quite catch that element. So that's the one missing thing. Maybe you can put some more perspective there.
Clarify. Yeah.
Then, of course, we are looking at four different areas where you are active with very specific items concerning future growth and also risks involved. If I would ask this specific final question as for me, in what area do you see the most upward potential? Secondly, what are the major risks which you face today? My questions. Thank you.
So for the first question, now we are transforming to four key markets, and with that, decreasing focus on UV and IDS. What will be the effect going forward? And I think, Rob, that is a good question for you.
Well, thank you for the question. UV is what we call a core proposition. It is appreciated and it is successful. So what we aim to do for now and in the future is we keep it as successful as possible, and we keep it as it is as a core proposition for now.
In what area is it? Report it on because,
it's not in one of the four main areas.
No, just total Nedap.
It doesn't fit the criteria of a key market. In that sense, we talked about key markets today, but it's still a UV and it's still within the whole of the company.
We'll report it separately.
No, that's a good question. Thank you, Willem. This is what we showed today was a snapshot.
Yep.
The good thing is it will be reported under Nedap revenue, just like all the other key markets.
Yeah. There was a second question. In what area do we see the most potential, and what are the major risks we are facing?
Healthcare. Oh, no, livestock. No, retail. It depends on the day. The interesting bit is, I think it's wise to have this balanced portfolio because it's very difficult to predict what's going to happen.
From a geopolitical perspective, all sort of other things. It's very important to have this spread in your activity. Exactly, to hedge those risks. The thing is, we believe in growth opportunities for each and every market group, and that's the reason why we want to invest in four of them and to already predict which is going to be the biggest grower, I find it very difficult.
Who is next? Right there in the middle, Please stand up, name and company. I will keep repeating that.
Yeah. Good afternoon. Rowan Nijboer from rowannijboer.nl. Thank you for mentioning the division of revenue between the market groups. Could you also give some color about the division of staff between the market groups?
I will move over to you.
I'll-
Daniëlle, yeah, sure.
I will take that one. Well, actually, we want to keep it at the snapshot that you got on the total revenue of our key markets. We believe that it is very important that we, within those key markets, make the right decision on the level of R&D people needed and the level of commercial.
It is very difficult to compare them. That is why we really manage the company as a whole and really put the teams where they are adding the most value. So we do not give a disclosure of the FTE or headcount per key market.
Also, it switches very often. So we have these themes that work for multiple market groups.
Yeah. For example, within R&D, there is a large group of people who are very good, let us say, in managing and hosting the platforms, and they are used for the various key markets. So not just for healthcare, but also for retail and security. So yeah.
Thank you. I am looking around for more raises of hands. I see Sitsa moving. There we go.
My name is Hans Koedam. [Non-English content] key market. [Non-English content]
Shedding a bit more light on the four biggest threats per key market. Starting with Rob.
Starting maybe in security, then. One of the things that is happening in security at the moment is that the threat that is over us, the geopolitical tense in the world, is actually also kind of helping us. This is not what we have foreseen a few years ago. I think the risk that I always see is that a competitor comes in with a different technology and overrules us.
This is where we have to be very, very sensitive constantly. This is also one of the reasons that we are constantly investing in exploring, and in R&D department, to make sure that we have always the latest technology, and at least we know what technology there is and what it does. For me, the biggest risk is basically for all the key markets is we have to watch our back constantly in the tech world.
Yeah.
There are 4 times 4, 16 risks and quite some overlap. One of the things is that we remain relevant for our customers, relevant for shareholders, but especially for our people, which means that attracting the right people is going to be crucial.
Once we lose our culture, where people are actually having an active role within the organization, have this entrepreneurial spirit, but also have this room to have this own individual way to take their responsibility, that is very important.
We found that if we limit that, and that is one of the challenges we have with the numerous of the quickly growing rules of regulation, how can we still keep this entrepreneurial spirit where a lot of things are being expected from that aspect of the business? If you talk about a risk is always a two-edged sword. It also offers great opportunities.
One of the risks is when you talk about being paranoid, is artificial intelligence. If you talk about the mother of all paradigm shift, AI is it. Obviously, we will have some room during the tour to talk about that, but AI will change a lot of things. The type of products we provide to our customers, we are already working on that, but far more, it changes the way we do our business.
I do not know whether you read the press release from Google. Google is already generating 25% of their code using AI. This has a huge impact on the productivity of your software developers. It also means that you need to have a completely different way to structure the way you organize business, how you do your requirements, if you know that you have unlimited coding capacity.
What kind of people do you need to employ if you have this endless capacity to create great software? How do you structure your business? Those are key things which we are working on already, and if we do not fix it is going to be a big risk.
I definitely would look at the other side. This is going to be great fun to reinvent Nedap again. I am quite sure that in a couple of years we have a new Capital Markets Day, and I think that part of the presentation will not fully be generated by AI, but will have a big impact on how we do our business.
To add on that, if we look at it from a market perspective, there is a lot of dynamics in the markets that we are active in, and it is very crucial that we stay close to those market developments. So, really not too late or not too early invest in scaling our propositions.
That said, from a market perspective, I think the risk could be, in retail, we really see the adoption of RFID, and we really see the coming up of new startups also offering their solutions to our customer base.
So we really need to make sure that we are ahead of our game. We are the market leader, and we need to keep to be that market leader. So from a market development perspective, I also would see that as a risk.
For example, also in livestock, we see now the dairy market this year being really slowed down globally. So it is very important that we are, again, on the right moment if it is catching up again, which is very difficult to predict. That would, I say, be a risk from a market perspective.
One, two, three, four. We needed four, right?
Sounds like you have one.
I had some time to think about it. I think keeping our resilience is also one of the topics that we have to cautious about. While growing our business, I think at the moment we're moving fast. If something happens in one group, then we can move people around, et cetera, and we should keep that resilience in the company.
Yeah. Thank you. That's four. Over to the next question. I see a lot of raise of hands, so let's see who gets the microphone first.
Yeah. I am Roger Offers from ROI Investments. I know it is difficult because on purpose it is always difficult to find, but I see a lot of passionate people on the podium. Technology for Life is kind of general for me still.
So maybe you can share something. I think culture is important, people are important, purpose is important, as you know. So I was thinking, because you were saying about reinventing, so it is not something like technology for reinventing life, a little bit more connected to your energy. That is my question.
Starting a little brainstorm here. Rob, can I see your feedback?
I am not quite sure if I completely understand the question. Can you-
More energy in Technology for Life.
Ah, okay.
Don't get us started. One of the great things about this Capital Markets Day is that this whole bunch of people sitting here, and a lot of other people, we all join up to express the way we want to present ourselves. This is very important. We're continuously looking at the way we present ourselves and how we can find words to express what we do.
I don't think it's so much the phrase itself, Technology for Life in this case, but the process itself that's way more important. I'm quite sure there will be a natural moment in time when we find something differently.
Don't get me wrong, we never get held back because of a slogan. Nobody will tell me we're not allowed to do that because that's not covered by the slogan. I think that eventually we will get up with a new slogan. Quite sure.
Yeah. To add on that, I think in all our key markets, we got back from our customers that they choose for us, of course, of our high standard technology solutions, but also because of our teams.
That's something that is really, wow, striking to me at least, that we get this energy and this passion for the markets and indeed changing the life of our customers in all those four different key markets. That is what brings us together as well.
I also believe you have to see it and feel it.
Yeah, true. Well, good. We have a tour.
Soon you will go walk around and talk with people in the market groups. I think what we did today is to try to get that energy into a presentation, which we always find difficult. It is up to you to see whether it has been successful, yes or no. But when you walk around, when you talk with people, when you see people, when you look people in the eyes, then you will see where the energy is.
Thank you. I see a few questions on this side.
Yeah, Cornelius Bos, Ogmar. I have a question on your different business units, especially where you see the most potential to actually change from a more traditional sales model to a SaaS model, and I am probably excluding healthcare because that will probably already be 90%-100% SaaS model.
I think that is for you.
We see that in every key market at the moment, but they are not all at the same pace. Healthcare started within security, right? Because of security, we now have healthcare, but they were the first one to go to a SaaS business model. Then we went to retail, and it took a while before retails were actually adopting the SaaS business model.
Even they told me that they would never do it, so please come up with an on-premises solution because that is the current standard in the market. But we have learned, yeah, that is the case, but they will see that actually, it is much easier to have this cloud solution and manage everything by Nedap. That happened. We are growing the iD Cloud at the moment.
Currently, we even see in security, which is a pretty traditional market, that also they are now turning into cloud solutions with our SaaS platform, and we see the same happening in livestock. The last two ones are pretty traditional, but they are moving to cloud. In all our markets, we see those opportunities.
Yeah. Also, we do not have an objective to sell as much SaaS. It is finding the right solution for the market and sell as much of that solution. In principle is what you see in each market right now, that SaaS is getting a more important component of that.
There is one thing that I would like to add, is that we talk about software as a service, but we also do hardware as a service. Both are a subscription model. Both are related to the recurring revenue. As an example, Luna is a piece of hardware, but we deliver it as a subscription model.
May I add to that? The great thing is, especially if you look at Nedap Livestock Management, we are already known for the great quality of our products. We always over-deliver to our promise, like battery lifetime. That is very difficult to sell if you are competing with somebody. I also have a great product, and I believe my product is great, too, but it is perhaps cheaper.
Especially if you sell the hardware as a service, it is not like a leasing construction, it is part of also software service. We really are benefiting from a lower cost price. So it increases our margin, increases the appreciation of the customer, because we can be very competitive with pricing as well. The fact that we have great, trustworthy hardware helps us in the subscription business.
In livestock is this example, yeah.
Livestock, for the SmartTags in this case.
I see a raise of hand over there.
Matthias from Shape Q. I have three topics of questions. The first one is on healthcare and the transition to network care. Do you think the groundwork for that transition is already there? Because I would guess, maybe decision-making is different on a GP level, and how to integrate that, you probably have to talk to buying groups and so forth, and you need some more support from the regulatory and legislative environment as well. That would be my first question.
Ruben?
You are absolutely right. First of all, you have to get the basics right, and that is the reason why we invest in Nuts. Nuts is this platform which is open sourced. That is our conscious decision to invest in setting up this foundation. I think that, how many companies, Peter, are connected? How many, yeah?
60 software vendors have chosen our ideas to interchange and exchange data, which is crucial for network care. First of all, also understand that you have to have formal/informal care. We choose to invest in care and to make sure that we also have a position in informal care. We are by far the largest. The GP is also important.
Now we have the whole basic ready to get to the next level. This next level where you do not optimize care in each and every silo, in each and every individual organization, but look at a region, for instance, how to use that.
That's definitely something where you have to get into regulations and to cooperate with the government. It's very important that you position yourself as a company that actually care about better care.
That's the reason why we invest, we give back to the market, because the people working for Nedap work not to make money, but they work in the first place, they want to have a better care system in the Netherlands. That's really what is, people trust us to take them forward and make those important decisions.
This is going to be a big step, and it's going to take a while, but the impact, if we can allocate resources in a way, of use resources in a way better way than we're doing so far, that's critical to make the Dutch care system even survive.
Because it's going to be really difficult in the next five years to provide everybody the care they need. This is a theme, you're absolutely right, but we are well positioned to play a leading role in that.
Yeah, and to add on that, it's also very important, of course, because if somebody else is taking that position, that would be a risk of our current position as well.
And just a very quick follow-up. Where would you see the Dutch healthcare system and you as a company within that, sort of in that groundwork phase? Where would you be, rather at the end of the groundwork or more middle or still early stage?
Peter?
All of them. If you're not in the early stage, you lose the market. Another one can take it away, and they will be in the early stage and make the standard.
It's difficult to pinpoint exactly which phase we are. I think that everybody recognizes something needs to happen, so the awareness is there. I think that a lot of people are not aware what needs to be done to make it possible.
We're getting there, what needs to be done to make it happen. And we already can demo a solution for certain parts of this network care. But this is one of the paradigm shifts. If this happens, it redefines the whole Dutch care systems, and we want to be upfront. That's the one thing I know for sure.
The second topic would be, it's interesting to see what really strong position you have in the retail market on companies with less than 1,000 stores. There's basically no real competition on the bars. But then when we go to above 1,000 retail stores, where you also, I understand, you want to take additional market share, but there it seems you're facing more competition as well.
So I was wondering why is that? Why you're crushing the competition on the smaller, let's say, customers, and you face more competition on the larger ones? And secondly, what needs to change that you take a bigger market share within these larger customers?
Yeah. I think we are very well positioned to take a larger position, but it's also how you measure market share. The way we presented this is in the amount of stores, which mean that if there is one competitor that has one retailer with a lot of stores, then it's also in this definition that he has quite a big market share.
At the moment, we have more clients than our biggest competitor has in the more than 1,000 stores. It's a very competitive area, in the more than 1,000 stores. But I think we have invested basically to grow our market share in that area. Also because of the credibility. We believe that if we can show that we can do this, then you can also do the smaller retailers.
We're also, of course, very interested in the smaller retailers, but we need to show those names and those logos to get credibility, to get customer references. And with that, we will then also go to the small. We're already doing it. But of course, to win market share, those bigots are really important.
Thank you. I saw another raise of hand earlier over here.
Yes. Tim Elias from Kepler Cheuvreux. One quick one on the U.S. political situation. Could you maybe elaborate a little bit on the risk from potential tariffs? I guess your U.S. exposure is relevant. Then the second question with regards to market share. You already mentioned that competitive pressure is the main risk.
How did the market share develop in the four key markets over the last periods? And then lastly, on recurring revenue. You said that you now generate roughly EUR 100 million. What's the target at the end of that strategic cycle? If you have growth of 20%, can we assume something towards EUR 200 million by 2028? Thanks.
Thank you. For the first question.
Political situation, I think it is too early to judge, and nobody can predict right now what is going to happen in the next few weeks, let alone over the next few months. I think the best way to answer is with the comment I made when I started with my presentation.
I am very happy that we do not work with a fixed five-year strategic plan, because we definitely need strategic agility in this case. It is too difficult to predict what it means, but we are definitely keeping a close eye on what it means, especially on the tariff side.
Of course, the one thing we have done in the last couple of years in our supply chain, we found suppliers, EMS, electronic manufacturers, that can manufacture in all places around the world. Then you split your. It is a way to solve the tariffs.
It is not the best option, to be honest.
Maybe just follow from that. Would prices be a significant disadvantage in the U.S. market to compete against your strongest competitors? Assuming there will be tariffs, you have to raise prices or they eat up margins. How would that position you in that field?
Yeah, I'm very curious how that's going to work out in a SaaS world. It's very early to predict that. Honestly, I don't know. What I do know is that one of the things that I valued enormously in the past years is with all the things that happened in the world, is that you have options.
One of the options is that we have an office in the U.S., so we can move certain components to the U.S. and maybe develop them there or whatsoever. Just the value of the option we have, that is something that I've been valuing enormously in the past few years.
Thank you. There was a second question that we didn't fully capture, but I think it was about how the market share development within the different markets. Am I right?
Yes. Up in all markets.
Short and simple.
Yeah. I think this year is a good example to share this. This year, lower, let's say, non-recurring revenue is really driven by the slowdown of the dairy market. We're actually increasing our market share in the dairy market. But of course, it's very important that we keep ahead of our competition, and certain key markets are more competitive than others. Yeah.
Thank you. It's time to move over to the last question.
Sorry, the last question.
Oh. Okay, then before we move over to the last question on recurring revenue.
What is the target?
No, we do not set a target for the recurring revenue. We are setting a target for total revenue, but we do acknowledge, which you have seen in all the presentations that you have seen, that the part of recurring revenue, the share of recurring revenue will increase, which will also contribute again to the stability and the predictability of our revenue, as well as our operating margin.
I am not going to share targets. I think what you have seen in the individual presentation, there is really great opportunities in all those four key markets, and we have to make sure that we capture those opportunities at the right time.
Thank you. Earlier, I saw a raise of hand over here as well. You can go.
Yeah.
Okay. Oh.
Yes. Sonne Labee, Norrøna Research. I want to comment first on the very impressive top-line growth and really underscore all the positive trends there. You talked a lot about scalability today, and that's where we were talking about targets.
I am a little disappointed in your targets on margin, because you are actually lowering the lower bound of your EBIT margin target there. So where is that scalability actually flowing through to the bottom line for this company? Because we love the top-line growth, but we want to see that fall through and that scalability really to come online.
Yes, what you have been seeing is our mid-term targets, indeed growing towards mid-teens, which is more a range. We do believe that the organic growth that we are about to show and are showing indeed on our revenue will contribute positively to this operating margin development.
We believe that the range is more appropriate to make sure that we do the right things at the right time in the market and create really the long-term value that we see in all those different key markets. We are aware of the developments of the last years, and we are really working on making sure that we increase that margin.
You are absolutely right about the operating margin. We want to have a higher operational leverage.
Yeah.
Right now, if you look at the numbers, our number of FTE has grown as quickly as the turnover. That's a fact.
Yeah.
The reason why we have done that we see more growth opportunities than we anticipated. We invest a lot in setting an office in the U.S. that came along quicker than we expected. We need to have boots on the ground, New Zealand, we need to have people, but also in South America.
It is a big step change in the number of FTE. We had all these Software as a Service platforms. We envisage at this time, and we have to be very that we do not expect this FTE to grow as in the last couple years. We really see this as a step change in making sure we are ready for this next phase. This is something we would love to see as well. So that is absolutely a theme in the organization.
We think we made a big step in getting the products right, the sales organization right. We have this letdown on the dairy side of things. You should not translate our guidance in 13% in 2028. Do not get me wrong, as Daniëlle was pointing out, still the first one is towards 15% in 2026. That still stands. We are aiming for that, and then we continue on that.
The ranges that Daniëlle was setting out is about the volatility of markets, and sometimes you see a new opportunity when we have to go deep and invest deep. But the great message is that we have a lot of upside, a lot of growth potential, and we are going to grab that.
I want to point out indeed, as I was saying, the investments that we are making are in new solution creator scale solutions with a recurring business model. The investment, the development, and the commercialization, it could take longer to see that back in your top line.
If I can cap that all off, is it right to say that the inherent nature of Nedap's business model makes it hard to really pinpoint the margin, and that is why you are setting the towards targets instead of absolute target?
Yeah.
Absolutely.
Absolutely. Yeah.
All right. Unless you disagree, I think it is time to get ready for lunch.
Yeah, just one comment. I want to share with you how proud I am in the fact how we organized this event. This event is a Nedap production, with all Nedap people taking care of all the visual, the organization, the presentation host. I am very proud of that. I want to share with that. So a big hand for the people who organized this one. Just to be sure, we are around to answer all your questions during lunchtime and during the tour.
I was about to say that. Because a few logistics, the lunch will be in the room in the back again. You have your name tags with a color, as you may have noticed. So we have dark blue, light blue, light orange, and dark orange. You will get a cue once your group is ready to come together and move over to the tour. So I am not sure how long it is. We ran over time a little bit, so not sure what time we will finish the lunch, but you will hear it.
At 2:00.
2:00.
2:00? 2:00. At 2:00, we will wrap up the lunch. The different colors will be called out one by one. You follow the person with the same color as your name tag for a lovely tour of our campus, and later on, we reconvene again for some drinks. Enjoy the lunch. Feel free to reach out to anyone you see, and see you later. Thanks.