Good morning, everybody. This is Martin Möllmann of Adesso IR speaking. First of all, I'd like to thank you for joining our Q1 earnings call regarding our quarterly statement we've published today. Within our release this morning, you found Adesso once again showing above-average organic growth of 11% in sales to EUR 353.4 million. This is exceptional in a macroeconomic environment such as the recent one. The operating result was on previous year's level with EUR 17.8 million. This is partly due to the known burdens from the product business, which should improve from the second half of the year. I'd now like to welcome as well our CFO, Michael Knopp, who will give us a deeper insight into the figures of the first quarter and the outlook for the remainder of the current year. As always, I'd like you to mute yourself during the presentation.
Feel free to open up the channels for the Q&A session afterwards. Participants on phones may want to mute or unmute their microphones via the star key followed by the number six of their phones. Thank you, Sephora and Michael, please, your turn.
Thank you, Martin, and good morning, everybody, also from my side. Very happy that you are interested in our Q1 figures, which we have published this morning. Yeah, Martin already mentioned that we are really happy about the development of our sales in Q1 2025. An increase of 11% to EUR 353 million is a very nice result. It's much better than the market and the figures we have seen from most of our competitors and peers. It's also important to highlight it's almost entirely organic, so no M&A impact there. It's really organic growth. Please keep in mind, I mean, Adesso is a company which generates more than 80% of the revenues in Germany. Germany is still in a difficult economic environment. It's probably the third year of a recession in a row. Gross domestic product was shrinking in 2023 and 2024.
For 2025, it looks not much better. In such a difficult environment, being able to grow the business by 11% is really a great figure, and we are really happy about that. If we look at the development of our headcount, headcount has grown year over year by 5% to 10,461 employees, which is an increase of 535 employees. We are still adding headcount. We are still growing our headcount, but we do it much more cautiously as we have done it in the past. Let's have a look at the split of our sales. At this slide, I would like to start with the explanation that we are highly diversified. There is no sector which contributes more than 20%.
The most important 10 customers contribute a little bit more than 20% in this quarter, and the most important customer a little bit more than 3%. We are highly diversified. We are not dependent on a single sector or a single customer. I think that's a very good positioning. If we look at the different sectors, let's start with the overall statement. All the sectors were growing except for automotive. Actually, this is not really surprising because our automotive industry in Germany is in a very difficult environment. It's struggling, and therefore to see a slight decrease here is not really surprising. Manufacturing is still growing with 6%. Financial services, insurance, banking are growing as well. Insurance without any significant license sales, similar to last year. License sales are something we expect in the second half of the year.
If we look at utilities and health, these are the two sectors which are continuing this wonderful growth: 37% for health, 25% for utilities. Health is driven by our bread-and-butter business, so nothing special in there. Utilities are driven by the strong market position for SAP in this sector. We are probably one of the market leaders or the market leader in this, and this shows up in the development of our revenues there. Last but not least, our most important sector at the moment, it's public. Public is growing by 11%. That's a nice growth rate. If we look last year for the whole year, it was 12%. We still see that budgets are shifted, budgets are delayed.
After the German election, the new coalition needed to be formed, and we believe that there's much more possible and should be possible, and we will hopefully see this in the second half of the year. In addition, we believe that this will also have a positive impact that the government has set up additional spending budget for the armed forces and the infrastructure, which should give an additional push for next year. 11% is nice, but there is more possible and should be possible in the future. If we look at sales by region, on the first view, it looks a little bit boring because not too much change. If we look at the split by region, 84% for Germany. Actually, I think that's surprising. I mean, it's already our most important market, and we have a very important positioning there.
We were able to grow the revenue there by 13%, even more than what we have seen for the whole group. In addition, Austria, Netherlands, Italy, Turkey are four foreign countries which have shown a very nice growth in revenues. For Turkey, I need to add that this is only the revenue which is generated in Turkey itself. If you have shoring, which at the end shows up in Germany, this is not included here. Switzerland, a little bit less than what we have seen last year. However, this is nothing special in there. It is just a thing of cut-off at the moment. Let's have a look at the earnings. As Martin already pointed out, on the first view, it is only a growth of 1%. We stay at EUR 17.8 million.
However, it's important to consider that last year, earnings got a significant contribution on a reversal of accruals for warranties, which was a result of the tax audit, which was finalized a little bit earlier at that time. If we exclude this, it's a very nice increase as well. It was mainly driven by improved capacity utilization. What was also important, we have, what I already showed you some slides ago, headcount grew by 5%, revenue grew by 11%. We also have some more material costs because we used a little bit more external staff than in the past year. If we look at the development of our EBITDA margin, revenue grew by 11%, EBITDA only by 1%. The margin, it's just mathematics, has a little bit decreased to 5.1%. I think that's a normal development if we look at Q1.
Personal costs, if we look at the different position of our P&L, have increased by 9%. That's the typical development in Q1, partially driven by more staff. We have hired 535 people since last year. In addition, we see the normal salary increases. Also nothing special in there. Other operating expenses are slightly higher, mainly because of hiring expenses, which were slightly higher, marketing expenses slightly higher, and travel expenses, external consultancy, and legal fees a little bit lower. What are the main profit drivers, and how did they develop? The most important one are probably the first two ones in this line. Utilization has increased. We already started in January better than last year, and February and March were a little bit more improved compared to last year. Also very good trends so far.
At least April, what we see is also better than what we have seen last year. That is fine. Daily rates have improved. We are working continuously on that, looking through our contracts, optimizing our projects. That is also a positive development. License maintenance was flat. There was not much in last year. Same applies to this year. Personal costs per employee have increased by 3%. However, if we look at the gross profit contribution by employee, it increased by 4%. In total, this cost item is also fine. The development of this cost item is also fine. If we look at the earnings per share, earnings per share minus EUR 0.54 compared to EUR 0.49 last year. If we look at the P&L, EBITDA flat, depreciation slightly higher. Earnings before taxes are also a little bit less than last year.
Income taxes, a little bit less because the tax rate is lower. 79% is still pretty high compared to the 33% we normally should have. As always, there are certain expenses which are not tax-deductible, and some companies contributed a negative result, and not all the deferred, the net operating losses were put as deferred taxes on our balance sheet. Let's have a look at some other key figures from our balance sheet. Cash is almost the same compared to March last year. Financial debt has increased. The same net debt has increased. It's around about EUR 20 million. There are two main reasons for that. At the beginning of this year, we have increased our shareholding in Kiwi from 70%- 100%. Same with Adesso Business Consulting. We also raised our shareholding from 71%- 100%.
Related to that, we have seen a cash out of EUR 27 million. In addition, we have done a share buyback in Q4 and Q1. This was another EUR 10 million. In total, EUR 37 million cash outs, which are not related to the operating business. If you look at the increase of net debt, it is EUR 20 million. Part of that EUR 37 million could be covered by operating cash flow, and the other shows up as an increase of net debt. Working capital, a little bit higher. However, if we consider the increase in revenues of 11%, working capital only 3% higher. That is, I think, fine as well. Could be better, sure, but it is still okay. Equity ratio, a little bit lower, impacted this year by the loss, after-tax loss, and also by the share buyback, which is deducted from the equity.
Let's have a look at the operating cash flow. Operating cash flow is lower. That's probably something which is not that nice, but it's a question of cut-off. We have more contract assets this year on our balance sheet. It's EUR 19 million, and this more or less explains this development. As always, these contract assets will be reduced in Q2, Q3, and the following months. That's normal despite the fact that this increase isn't that nice. Free cash flow is negative, but that's the normal development we always see in Q1 and probably also in Q2. In Q3, in Q4, this turns around. I need to highlight that we do factoring. Factoring last year was EUR 52 million. This compares to EUR 57 million in the first quarter of 2025. Let's have a look at our guidance.
I mean, our market demand for our services is still high, despite the difficult environment. This at the beginning gives us a positive perspective. We will see an improved margin because our utilization will be higher, and we have already shown this in Q1 this year. We will also have some reduced investments. This is a very important piece, and utilization is also higher because, as I pointed out, we still add staff. We hire people, but we do it a little bit more cautiously than in the past. We avoid that utilization going down because we add too fast, too many additional employees. If we look at the guidance in terms of sales, if you say we should achieve 25% of our contribution to the guidance in each quarter, Q1 fits perfectly between 24%-26%. That is fine.
EBITDA is a little bit less, but that's normal. This would also be the case in Q2. One main reason for that is that the second half of this year will have seven more working days, and this has a tremendous impact on our earnings. This development is fine. Actually, it's exactly what we also have included in our budget. We are on track. Therefore, we can confirm our guidance, guidance EUR 1.35 billion-EUR 1.45 billion in revenues, and also the range for the EBITDA EUR 105 million-EUR 125 million. We believe that during the year, the public sector will get some positive impacts from additional spending from the government. We are pretty optimistic regarding our SAP offering. What's also important, our EBITDA margin, because of the higher utilization.
We believe that we also, in this regard, will achieve our guidance, which says improvement there to 8%+ X. At the moment, we are totally on track. Thank you.
Thank you, Michael. We will now go ahead to the Q&A session, as you might know. Participants on phones may want to unmute their microphones via the star key, followed by the number six of their phones when they are liking to speak or put questions. Do we have questions at this point in time? Mr. Wolf from Warburg.
Yeah, hi. Thank you. Good morning. Congratulations on the strong top-line performance. The first question is regarding the public sector. It grew quite nicely at 11%, but it seems like you expected or would have been prepared for even higher growth. Is that correct? As you are mentioning, some underutilization in this field.
At the same time, you had higher material expenses. I'm just trying to match that. You were relying on more external expertise. I'm just wondering to what extent the internal capacity can be allocated to the different verticals that you have, as obviously, there was a higher reliance on external expertise. That's kind of question number one. Question number two, it seems like the gross profit per head increased in Q1. I'm just trying to match that with the higher material expenses. Usually, I would assume that the gross profit per head would usually then have a negative impact if material expenses increase. I'm just trying to understand this. Do we also have higher or to what extent did you increase daily rates? Let me ask the question this way, just to better understand what was going on in the first quarter. Thank you.
Okay. I mean, public sector, an increase of 11% in revenues, it's a good figure. If we look at the overall increase of our revenues, it's exactly in line. However, we all know that there is a lot to come. We are, let's say, despite this 11%, disappointed, maybe the wrong word, but more should have been possible. Due to the election and the shift of budgets pushed to a later stage in this year, a higher increase in revenues was not possible. That is more from this perspective. 11%, it's a great figure. We believe more is possible. Before there was this, let's say, change in government, at the time we made the budget, we probably hoped that we will see this increase a little bit earlier. If we look at the material expenses, this is not related to a specific sector.
It's just that we increased our employees, but the demand increased higher than the increase in employees. Please keep in mind, every person has a specific skill, and you always need to find the right match. Even if you have some people which are not fully utilized, it does not mean that you always have the right skills sitting on the bench. Therefore, you will always need some material, some external staff, which will show up in the material expenses. If you look at the gross profit per head, I mean, you take the employees you have, and then you compare it with the gross profit. Even if the contribution per head is, let's say, if you use external staff, this helps also the gross profit per head. Thank you.
Okay. Does it answer your questions, Mr. Wolf? Yeah. Thank you.
Then we have more questions from Saw from Kepler Cheuvreux.
Hello. Thank you. Just one question from my side. I was wondering how employee attrition developed in Q1.
Yeah. It's still below 10%, somewhere at 8%. We have seen sometimes some a little bit lower rates, but we are still 8% is still a pretty good figure, especially if you look at the rates, what you see with some of our competitors. So 8%, it's okay for us.
Great. Thanks.
Do we have more questions? Mr. Saw again.
Yeah. Thanks, actually. I do have one question. I was wondering if the political turmoil in Turkey has any impact on your business there over the past couple of months.
No. I mean, so far, we are growing in Turkey because Turkey, first of all, they have their local business. More than 300 employees are generating revenues for Turkey customers.
The other 50% of the staff are used for shoring. Let me say it in these words. It was not part of our discussions internally. We have a review meeting with Turkey management meeting that the business is impacted by the political development. I mean, Turkey in the last few years was always a little bit challenging, the environment. It is high inflation, which is always not that easy to handle. So far, we do not see any impact from that.
Mr. Wolf again. Mr. Wolf? Yeah.
Can you hear me now? Yep. Yep. Okay. Thank you. A quick follow-up, if I may. Maybe on the IT solutions business, could you speak a bit about the volume of the pipeline and the conversion that you expect towards H2? That would be helpful to better assess what H2 might look like. Thank you.
Let me say it in these words. The pipeline looks much better than last year at the same time. We are pretty optimistic that we can close some deals in the second half of this year. However, different to our IT services business, the whole thing is more digital. I mean, it's not that you have a pipeline with dozens of significant deals in there. There are a few very nice deals in there, but at the end of the day, it's a yes or no decision. It is very, very difficult to predict. What I can say is the pipeline looks significantly better than what we have seen last year in Q1. There should be some deals possible in the second half of the year.
Thank you. One further question regarding the contract assets that you mentioned during your presentation.
As you've pointed out, they've gone up. Is there any specific customer behavior which is expressed in this increase? Are clients asking for more fixed-price contracts in this type of environment where, at least for many other players, demand appears to be somewhat sluggish? Thank you.
Contract assets are put together from two different items. One is normal time and material contracts where the time was already spent on the project, but we were not able to invoice it for technical reasons. Normally, customer approves the timesheet before you send an invoice. This has a little bit picked up. The other reason is, that's right, related to fixed-price projects. Actually, my view on this is it's more a technical reason. There's no specific reason for that, that it increased. This will decrease over the year, similar to what we have seen in the past.
That's not a trend or something special behind that.
Thank you. And my last question, and then I'll go back into the queue. Could you comment also on SAP and how it has helped you to improve this overall process from the service delivery to invoicing, whether you see significant enhancements and if you expect this process to improve even further?
Yeah. At the moment, we are still in the rollout. I mean, we have rolled out SAP to the SOSE. Then we have continued to roll out to some of our subsidiaries. This rollout is still going on. The other important thing, and all the people who have ever worked with an SAP system are aware of that. Just a moment. All the people who work with SAP are aware of that. An SAP system is never finalized. You always need to continue to improve the processes.
Actually, we are currently in this situation that we have SAP working, but there is a lot of room for improvement. We are still going through the different processes, making things easier for our staff to make it better to handle, to be quicker. It is a very nice tool, and it is probably the best decision we could do for this finance area and all the other areas which work with the SAP system. There is still a lot of room for improvement, and actually, it is pretty positive because this will have a positive impact on our cost structure.
Thank you. Okay. We have Dr. Jakubowski from SMC Research.
Hello. Yes, I am Jakubowski. Can you hear me? Yes. Yes. Great. Thank you for taking my questions. Maybe you have already answered it. I had to reconnect again after I lost the connection.
Could you give us some details on the utilization compared to the normal level? How far away are you still from this normal utilization, or how much space for improvement do you still have in regards to the utilization? That's my first question.
The utilization is always a little bit different in the four quarters. Q1 and Q2 is always a little bit, always normally see a little bit less utilization than in Q3 and Q4. If we compare this year's Q1, it was much better than last year and also the year before that. The other important factor is always how many working days do you have and how many vacations you can take. That's why Q1 and Q2 are always a little bit weaker. You have less working days. You have more bridge days. You have Easter.
You have Christie Himmelfart and on all these special days. That is why Q3 and Q4 show, let's say, not only a higher utilization, but also this utilization applies to more working days because you do not have the public holidays and less vacation.
Okay. Okay. Last year in Q1, the utilization was really bad. If you compare this year, the first quarter with, I do not know, two years ago or three years ago, is there still room for improvement?
It is comparatively good. If you compare it with the last few years, it was really one of the better years, and it was a good start for us in 2025. It was much better than in 2024 or 2023.
Okay. Great. Maybe you could give us some details on your activities in India. How are you doing there?
This year, we will increase our staff in India significantly. We are close to 200 people now, and further increases are expected. This is, I mean, so far everything is going according to plan. It is higher, the staff, and then we need to get them into our projects in Germany, Switzerland, or somewhere else. So far everything is going according to plan, and we intend to increase our staff in the second half of this year further. So far, we are pretty happy with the development.
Okay. Thank you. The last one, if I may, if I saw it right, in your income statement, the minority interest was quite higher than last year. Taking into consideration that you bought the remaining shares in Kiwi and Adesso Business Consulting, I was assuming that the minority interest would sink this year. What was my mistake?
You are right.
Yes and no. The mix in the minority interest has changed. Last year, part of the minority interest was Kiwi and business consulting. This year, a major part is Material One and Afida and some other smaller companies. The important difference is it's a minus this time. It's not a plus. Because the two companies which would have contributed to a plus there, that's where we have increased our shareholding to 100%.
Okay. Thank you very much.
Thank you, Mr. Jakubowski. Do we have more questions from the audience? Just a short reminder, participants on phones can unmute their microphones via the star key followed by the number six of their phones. No more questions. I would like to thank you very much for your participation in our call today and your interest.
I wish you all the best and hope to see you in person soon, maybe on the German Spring Conference tomorrow or other occasions. Thank you. For now, goodbye.