Good morning, everybody. This is Martin Möllmann of adesso IR speaking. First of all, I would like to thank you for joining our Q3 and nine months earnings call regarding our quarterly statement we have published today. With the release this morning, you found adesso keeping up its fast organic growth pace with +13% sales of EUR 1.22 billion. The operating result was improved by 26% to EUR 98.4 million. This is EUR 20.1 million more than previous year's EBITDA contribution. Utilization remained high since May. Earnings in the third quarter were particularly strong, with an isolated EBITDA of EUR 52.6 million. Hence, the full-year forecast ranges for sales and EBITDA remain well within reach.
I would now like to welcome as well our CFO, Michael Knopp, who will give us a deeper insight into the figures of the first nine months and the outlook for the remainder of the current year. As always, I would like you to mute yourself during the presentation. Feel free to open up the channels for the Q&A sessions afterwards. Participants on phone may want to mute or unmute their microphones via the star key followed by the number six of their phones. Thanks so far. Michael, please go ahead.
Good morning, everybody. I will guide you now through our figures for the first nine months. As always, I will start with our revenues. Revenues came in with EUR 1 billion 217 million, which is an increase of 13%. If we look a little bit more in detail into this, we started with EUR 398 million in Q1, which was an increase compared to the previous year of 13%. Q2 followed with EUR 396 million, increase of 12%. Now in Q3, we see revenues of EUR 423 million, which actually is the highest revenue which we have so far seen per quarter. This was an increase of 14%. We are very, very happy with this result. It is absolutely in line with our budget, with our expectations. So far, also these expectations were met. The environment is still challenging. There is a certain price pressure.
However, the German economy is slightly improving. This year, the gross domestic product is expected to grow between 0.5% and 1%, and that is better than what we have seen last year, especially compared to 2023, 2024, where Germany was in recession. Germany is our main market. Also this year so far, in Germany, we generated 83% of our revenues, and therefore, we are highly dependent on this market. If we look at the development of our headcount, the average headcount for the first nine months compared to the average headcount for the first nine months 2025 increased by 8%. This is less dynamic than what you know normally from adesso in the past. Also this year, if we look a little bit back, we started with an 10% increase in Q1. For the first half year, it was 9%. Now it is 8%, so it is less dynamic.
This becomes even more obvious if we look at our headcount at the end of this quarter, 11,578 employees, full-time equivalents. This is an increase compared to the 30th of September last year of 467 employees. That is an increase of 4%, so it is significantly lower than what we have shown in the past. If we look at where we did increase our headcount, actually one-third happened in Germany. If you look what this is in percentage, it is 2% increase. This happened mainly in the SAP area. If we look abroad, there we increased our headcount by 2/3. Two-thirds of the increase was generated abroad, which is an increase of 14%. Where did we increase our headcount abroad? Mainly in Switzerland and the countries where we do shoring, and mainly in India, where we currently employ 420 employees.
Another interesting figure, if we just look at the development since the beginning of the year, there we see an increase of our headcount of 2.5%. So, as budgeted and planned, we targeted to lower the speed of the increase of our headcount, first of all to also improve our utilization and also to consider the expected efficiency gains due to AI in the future. Now let us have a look at our different sectors. Except for automotive, where we have seen a decreasing revenue of 12%, all other sectors show a nice growth rate. Even automotive, compared to previous quarters, is slightly improved because after six months, it was a minus of 16%. It is positive for us that actually automotive is our by far smallest sector. If we look at all the other sectors, insurance, we see a very nice increase in revenues.
This is mainly due to the very nice order entry at second half of 2025, especially in Q4. Banking, nice revenue increase. Actually, there we have also a very strong order entry so far this year. Then health, here we have a little bit less dynamic growth than what we had shown in the past. This is actually due to the fact that last year in Q2, we won a very important order with statutory health insurance, and this project generated revenues in Q2, especially Q3, and a little bit in Q4. A similar project this year is missing, and therefore, the increase is a little bit less dynamic than what we have seen in the latest past, which was at that time a little bit higher.
If we look at public, increase of 9%, here we see the impact, the tailwind also from the two additional budgets from our government and improved economy in Germany. Retail, very nice increase, and also again, very, very dynamic utilities. Utilities, again, driven by our SAP business in this sector. Overall, it is again a very diversified picture. If you look where revenue is generated, there is no sector contributing more than 20%. Top 10 customers contribute a little bit more than 22%. In terms of revenue, the most important customer contributed so far this year 3.2% of our revenue. So, it is a very nice situation not being dependent from a single sector, a single group of customers, or just one important customer. If we look at the sales by regions, not too many changes so far.
Germany contributed 83%, which is a growth of 13% compared to the previous year. It is exactly in line with the overall growth rate of adesso Group. If we look at the revenue development abroad, there we have an increase of 14%. Here we see especially a very dynamic development in Switzerland. If you look back last year, it was a very challenging environment in Switzerland for us. We started with -7% in terms of revenue, improved over the whole year to a minus of 3%, and now we are back with a very nice growth rate, 15%. As we generate more than 50% of our revenues abroad in Switzerland, this has a very nice impact on our overall revenues abroad. Nice growth rates also in Austria and Italy. Turkey, a little bit impacted by the sluggish economy in Turkey.
Netherlands, the decrease is actually due to one big customer where we have reduced budgets compared to the previous year. One last view on the split by regions, 95% again is contributed by the German-speaking region, Austria, Switzerland, and Germany. So, not too many changes on this slide compared to the past. Now let's have a look at our EBITDA. EBITDA came in with EUR 98.4 million. This is an increase of 26% compared to the previous year. If we look a little bit more in detail into this, we started with EUR 27 million in Q1, which was EUR 10 million on top compared to the previous year. Q2 came in with EUR 18.8 million, which was a little decrease compared to the previous year. So, after six months, we were at +EUR 8 million compared to the previous year.
Q3, very, very nice improvement, EUR 52.6 million, which is a +EUR 12 million compared to the previous year. So overall, now it is +EUR 20 million after nine months compared to 2025. So, it is a very nice development, and it is mainly driven by higher sales, improved utilization, other operating expenses significantly less dynamic than the increase in other areas. Therefore, we have seen this very nice improvement. On the next slide, we get a little bit more in detail. Let's start with the employees, +8%. If we look at the average headcount this year compared to the previous year, sales +13%. If we look at gross profit, it is +12%. This is due to the fact that material costs again increased a little bit more. Growth rate, which is disproportionately higher, actually 22%. Therefore, the gross profit came in with +12%.
Personnel costs a little bit less dynamic than the revenue growth. I think what is very important also for the very nice development so far, other operating expenses just +3%. So if we look at the whole picture, why do we see this nice improvement of our EBITDA? It is actually higher revenue, which contributes more EBITDA, a better utilization, and disproportionately lower growth rate of our other operating expenses. Let's have a look at some key performance indicators, and one of the most important ones is our billable utilization at adesso SE. Actually, this was this year kind of a rollercoaster ride so far. We started in the first four months with a very weak development. Billable utilization was below the previous year. It was below our budget, our expectations. Then we have seen a very nice turnaround starting in May.
A very strong utilization in Q3 with utilization rates which we have not seen since quite a long time. If we look at October now, not all the hours are entered in our system so far, but what I can already summarize, it will be again utilization which is above our budget and our previous year. If we look at the daily rates, it is a competitive environment, so therefore, we were able to increase our daily rates, but only a little bit. Let us say it is in line with inflation. If we look at licenses and maintenance there, we always look at our in|sure product line. Development after nine months is flat.
Actually, licenses is a six-digit number, median six-digit number below the previous year, so only a little variance. However, maintenance is a little bit higher, so if we look at the overall figure, it is more or less unchanged.
We have our personnel cost per employee. Here we see an increase. There are also different components, different contributors. First of all, we have an increase of our salaries in line with inflation. We have hired more senior people, so the average salary per employee is impacted from this as well. On the other hand, we have increased our headcount in those countries where we do shoring, and this is lowering the average salary per employee. So at the end of the day, it is +3%. Now, let us have a look at some other figures. We have depreciation, which is slightly higher. Actually, this is caused by a special situation at material.one, where we have written off some goodwill in Q2, EUR 2.1 million. In addition, we have also done another extraordinary depreciation of our own work capitalized there in total EUR 3.4 million.
If you exclude this, depreciation is more or less the same. Income from equity investments slightly more negative. Financial result, as we have drawn more lines from our syndicated loan, interest is slightly higher despite the fact that at least for the first half of the year, the interest rates were a little bit lower than last year. So overall, pre-tax income has improved quite nicely. Tax rate has improved as well. It is only 57% compared to 77% last year. It is still quite high. Normally, you should expect your tax rate between 33%-35%. However, there are three items which need to be considered. Certain expenses are not tax-deductible. Some of our entities have generated losses, and we have not put these net operating losses carry forwards as a deferred tax asset on our balance sheet.
The goodwill depreciation at material.one is not tax-deductible as well, so therefore, we have this tax rate of 57%. If we look at the earnings per share, there we have a very nice improvement. It is EUR 2.15. If we just look at Q3, it is EUR 3.01. So nice improvement compared to the previous periods. Now let us have a look at some items from our balance sheet. Net debt, more or less unchanged. If we look at the operating cash flow, this is the period for the first nine months this year compared to the first nine months last year. It is a significant improvement. That is something which we already have seen after six months. This has now materialized a little bit more. Net working capital, we were able to bring this figure a little bit down.
If you remember, we started with +28% in Q1. In Q2, it was +21%. Now it is +15%. However, we need to consider that we have used a little bit more factoring, as we were able to increase our factoring lines at the beginning of Q3. Therefore, it is not really 15%. It is a little bit higher, but it is still an improvement compared to the previous quarters. Goodwill, more or less unchanged. Equity has improved, and equity ratio now is 22%, so also a little bit improved compared to the previous year. Now let us have a look at the operating cash flow. We have already seen there is a very nice improvement. If we look at the CapEx is a little bit less than last year.
Lease repayments, that is something which we consider also as CapEx, following the recommendation of the IFRS Foundation regarding the treatment of IFRS 16. Now let us have a look at our guidance. Initially, I would like to start with what we did expect. We expected an increasing demand for IT Services despite the still weak economy. That is actually what happened. We expected some tailwind from the additional budgets in Germany. Also, this happened despite the fact that it is a little bit less than what we all initially expected. The AI demand is driving our business. It is helping us. You might have seen it in our release today, EUR 93 million of our revenues were, let us say, supported by, allocated of our order entry to AI. So it helps our business.
That was one of our main goals at the beginning of the year, to stabilize our utilization.
Actually, after a pretty weak start, we are better in this area. We have now a very significantly improved situation since a few months. So this is a very nice situation. What is also important, this year has two additional working days compared to the previous year. Actually, these two additional working days are in Q4, November and December. There is one day more compared to the previous year. So this will also have a nice impact on our EBITDA. That is what we considered at the beginning of the year. If you look at our figures, we are absolutely in line with our expectations. We have guided for EUR 1.6 billion-EUR 1.7 billion in revenues. There is an increase compared to the previous year between 9% and 16%. If you look at the achievement level, at the moment, it is 72%-76%.
So it is very, very likely that we will end exactly within this corridor. We feel pretty confident regarding this. EBITDA is always a little bit more challenging to forecast. We have guided for EUR 130 million-EUR 150 million. So far, we are in a corridor of achievement of between 66% and 76%. If you look at the previous year, it is in line with our achievement status last year after nine months. So also here, we feel very, very confident to achieve an EBITDA which is within this corridor. Let us have some updates regarding the EBITDA margin. That is something I missed on the previous slide. I mean, we have guided for 8.4% plus X percent, so only a little improvement. So far, we are significantly better than what we have seen last year, 8.1% compared to 7.3%. So, it is 0.8 percentage points better.
But we stick with our guidance here, 8.4 plus X, plus only a little bit, not that significant than what we have seen last year. And now I am happy to answer your questions.
Thank you, Michael. That was helpful. We are now heading for the Q&A session, and we already have some questions. First one was Andreas Wolf from Berenberg.
Hi, good morning. I hope you can hear me well.
Yes, we do.
Congratulations on the strong profitability in Q3. I am looking into Q4 now already. Could you comment on the size of the Q4 2025 license deals, and how much of that do you expect to recur, and what license deals are in the year-end pipeline? If I look at the Q3 P&L, it seems like material expenses/purchase services have increased sequentially. What should we expect for Q4 here? Thank you.
Okay. Regarding license deals, I mean, last year we have seen a very, very strong Q4 because we have seen a high single-digit number of license revenues. This year, we expect this figure to be significantly lower. There are some deals in the pipeline, and as always, it is very difficult to predict if they will be closed within Q4. Currently, we believe we will see some license revenue, but it will be less than last year. Material expenses, I mean, there will be always some fluctuations from quarter to quarter, but the trend will continue. We will see increasing material expenses due to the fact that we rely more on third parties, on freelancers, on partners in consortiums where we are the general contractor. We will see increasing cloud consumption and also token consumption.
This will have the impact that the increase of material expenses will be disproportionately higher in terms compared to our revenue development.
Thank you. Then I have a follow-up question, if I may. It is related to AI, obviously. Full-time equivalent rose by 4% year-on-year. Sales for the nine months grew by 13%. How much of the increase in sales is related to AI-supported software development? Could you also comment if clients are asking to share efficiency gains? That is the first follow-up, and the second is related to the public sector. Do you see increased tender momentum for next year in the German public sector? Thank you. That is obviously related to the 500 billion extra fund, that question. Thank you.
I mean, it's not that easy really to say what is the direct impact of AI. What we have done and what we have also included in our earnings release today is that EUR 93 million of our order entry was, let's say, influenced by AI. However, it's always a little bit difficult to say what is really influenced and what do we include in this calculation and what do we exclude. But we see a strong momentum that this figure is increasing. The other important part is that we also get more productive. I mean, AI influence means that the order itself has components where we offer something or build something for customer related, let's say, to AI. On the other hand, AI is also a tool for us to be more productive, for example, for software development, and that's the other important component.
But it's impossible to say we are more productive by this or that percentage because of the usage of AI. What we, for example, monitor pretty closely is the token consumption we have, because that's already a very important number and something actually which we did not have at the beginning of the year. There was nothing in our budget for this because this number was neglectable. But today, if we look at the last month, it's a very, very high six-digit number per month. So, we are talking about some millions already on this year, and that's something we are monitoring. But again, it's very difficult to say because we have used this token consumption, therefore we are that much more productive. This is difficult to say. Public sector, yeah, it's always difficult to predict how tenders might develop next year.
I mean, if we look back last year, we also assumed or predicted that we will see a strong increase already in Q2, beginning of Q3, and actually it started to show up at the end of Q4. So far, there is more momentum. Actually, we believe that this will continue. Will there be an increase compared to this year? Difficult to say. I would say probably not.
Great. Thank you.
Thank you for all the questions. Now we have Mr. Ziering from Jefferies Capital Markets.
Great. Thank you. Good morning. A few questions were already answered, but I have some follow-ups. The first one would be on utilization again and on your capacity. You mentioned utilization being high since May, basically. Maybe you could provide some more color on the rates in Q3 versus Q2, and then also in October, so going into Q4. Then maybe also on your headcount, FTEs are down quarter-over-quarter. Could you talk about the capacity ceiling and also on your hiring plan for 2027, given the expected productivity gains from agentic software development that you also just alluded to? Then the second one is on GenAI again, on the order intake that you mentioned. You quoted the nine-month figure, but this implies only EUR 20 million in Q3 after EUR 74 million in H1.
Is that really a slowdown or is it just lumpiness or also a change in definition on your side? That would be helpful. Thank you.
Okay. Let's start with the utilization. I mean, if we now currently look at the utilization, it's between two and three percentage points higher compared to the previous year. If we look at this since the beginning of the year compared to the weakest month, it was up to seven percentage points higher. So, it's really significant. Normally, we would say, okay, an improvement of one or 1.5 percentage points, but currently we are really at a level between two and three or even 3.5 percentage points in one month compared to the previous year. So, it's a significant improvement. Hiring, I mean, we are still hiring. We have changed a little bit the way how we are doing it. We have increased or continued with our hiring efforts abroad. We increase our activities in those countries where we do shoring.
You might have seen we have also set up a shoring and a subsidiary in Portugal. We are hiring still additional employees in India. Also in Germany, we continue hiring, but in the past probably it was more equally split between all different sectors and horizontals. Let's say at the moment, we are looking a little bit more in detail into it, where does it make sense to hire people? For example, in SAP, we are still adding people to our workforce because the order entry is that strong that we have challenges to cope with that. We will continue hiring, but probably what we will not see is this 10% or 15% increase what we have seen in the past for some years. GenAI, actually I expected this question from our press release that someone might ask. It is a little bit less dynamic in Q3.
Please keep in mind, sometimes it depends from one or the other order. If you have, let's say, one order less, one bigger order where you say it is AI-supported or AI-influenced, then you might have this fluctuation. So, probably the conclusion to say it is less dynamic now, because Q3 only it is plus EUR 20 million compared to EUR 73 million in the first two quarters, it is probably a wrong conclusion. But we have not changed the way how we calculate that.
Okay, that is helpful. Thank you. Then just one quick follow-up on the tax rate. You already mentioned the moving parts, and I know it is difficult, but maybe you could just provide some broad guidance on the normalized tax rate for 2027. I mean, now in Q3 it was around 36% after a very high level in the first half, so any comments would be appreciated.
To be honest, we have not made our budget so far, and therefore we do not have the expected tax rate. What is probably important and is driving our tax rate is as long as we have some subsidiaries which are loss-making, this has a significant impact on our tax rate. So if the earnings are more equally split between subsidiaries and there are no loss-making subsidiaries, then it would significantly improve our situation there and lower our tax rate. But again, we have not made our budget so far, and therefore it is difficult to predict something regarding the tax rate.
All right. Thank you.
Next one in line is Mr. Spang from Tigris Capital. Mr. Spang, can you hear us? If you are on the phone, please unmute your microphone via the star key followed by the number six. Then we go further to Dr. Jakubowski, SMC Research.
Hello. Good morning. Can you hear me?
Yes.
Great. Thank you for taking my questions. Also from my side, congratulations on the numbers. Very strong numbers in Q3. I have first one follow-up questions regarding the loss-making subsidiaries. Concretely, it is the segment IT Solutions. It is still negative. Maybe you could give us some update on the situation in the segment and your plans and expectations.
Yeah, that is right. I mean, some of our group companies in the segment IT Solutions are loss-making. It is a reduced loss, but it is still loss-making. This is one of the contributors to this, let us say, higher tax rate. Then, please keep in mind, we also have set up some subsidiaries abroad, for example, in Middle East, in Singapore, in Belgium. These companies are still loss-making. Some of them are close to break-even. Others, we still need some way to go. This also has an impact on our tax strategy. It is not only IT Solutions, it is also some of our foreign group companies which contribute to this higher tax rate.
Okay. Talking about IT Solutions segment, do you still expect a break-even for 2027?
It is our goal to come close to break-even in 2027. However, the final budget is not done so far, therefore, we need to update our expectation. So far, it is our expectation that we will get close to break-even. There is nothing on the table currently which changes this statement.
Okay. The path to profitability goes through more sales, or there is no restructuring anymore? You have to-
It's increase of revenues. Also, what's also still important is an increase of significant license sales, what we have seen in, for example, last year. This altogether will lead to a situation where we come close to break-even.
Okay, great. Thank you. The next question regards the Personnel costs. Given the rising inflation in Germany and in Europe, do you expect the wage growth to accelerate in 2027? Have you received any signals from employees?
Again, we are still in the budgeting process. For Germany, probably it's fair to assume that we will see a comparable salary increase. However, there is something that we have not calculated so far, but this will have a negative impact. The Deutsche [None- English content] has disproportionately increased. Even if the salaries just have an increase of the inflation rate, the overall personnel expenses will be impacted by this disproportionate increase of [None-English content] in Germany for social security.
Okay. Thank you. The last one, it's coming back to AI. Maybe you could give us some impression on how AI and your productivity gains at adesso and your competitors affect your pricing and the price competition.
I mean, AI is becoming more and more important. As outlined in our press release, there are more and more order entry is, let's say, related to AI. Let's say the whole market is still working on how future pricing may look like. You need to incorporate these efficiency gains. You need to incorporate in your offers the token usage, the material costs you have. If you look at your contracts with customers, old frame contracts, for example, they don't know AI and token usage. This is something which is currently on a very dynamic way to be incorporated in all our customer situations. At least what we can say so far, and our figures proved this, there is not an extraordinary price pressure for AI.
There are certain risks and certain things which might be negative, and others are opportunities and chances because certain orders, because you use AI as a tool yourself, adesso is using it makes us more efficient. It has some outcomes which support our earnings, and others might impact them. It's difficult to say at the moment what the overall impact is. At least if you look at the development of our revenues and also our EBITDA, it's fair to assume that we don't have an overly negative impact, but that the impact probably is more positive, because we have these productivity gains.
Okay, great. Thank you very much.
Okay, thank you. Now I hope the technical difficulties are fixed and we have Mr. Spang again.
Yes, now it should work.
Yes, we can hear well.
Good morning to both of you. I would like to follow on again on the topic of the insurere pipeline. Maybe you can give in general some insights. How is it developing, also in terms of maybe the number of possible deals you are working on the volume you are working on? Then also a structural topic in this term, because in the past we had also the topic of changing from on-premise licenses to SaaS licenses. Maybe you can comment also on how should we think in this relationship, if this is also a reason why you expect less license revenue this quarter due to possible more shift to SaaS instead of one-time licenses? That would be my first question.
If we look at the structure of our license revenues, it is important to know that we are not talking about 10 or 15 or 20 orders coming in during a year. We are talking about, let us say, a medium to high single-digit number, and therefore one order on top or one order less can have a tremendous impact. That makes it that difficult to predict, even if we are now at mid of November, to say what will be the license revenue until the end of the year. If we look back last year, if I would have spoken with you in, let us say, 10th of December, the answer would have been, "There are no license revenues so far." Then in the week before Christmas, all the expected license revenues I was talking about since Q2 came in. So, this is very, very difficult to predict.
If we look at our pipeline, there are several options in there where we believe they have a very high probability to materialize, and therefore, we expect license revenues. However, if you look at the structure of our pipeline, it will be less than last year. But again, it's not dependent on bringing in five or 10 different deals. We are talking about a few which are possible, and probably at the end of the day, two or three will materialize, and therefore it's very digital between zero to we overachieved. Do we see an impact because of the option for our customers also to do it in a SaaS contract constellation? No, not really, because there's no shift in this way that there are no licenses in the future.
It's some customers decide, "We want to do it with a SaaS setup." Others decide, "I want to buy the licenses." Actually, we also have seen setups where part of this is SaaS, part of it, but the customer buys the licenses. So sometimes it's even split. So, it's really difficult to say, this will be the impact, for example, now in Q4. We are talking about a pipeline where we see certain customer which might order licenses. So, there's no impact because of SaaS on this, because these customers in the pipeline are really interested to sign a SaaS deal, a license deal.
Okay. Understood. Thanks. On the guidance for EBITDA. I understand, and you have explained it now several times, that Q4 last year was very strong in terms of EBITDA due to these license deals. Maybe some millions this quarter less than last year, but on the other hand, you have a higher revenue, you have a better utilization versus last year, and you have two more working days versus Q4 2025. So, in the end, that should be also, again, a good quarter in terms of EBITDA this year, and we have now nearly EUR 100 million after Q3. So, EBITDA guidance is EUR 130 million-EUR 150 million. So, why have you not maybe narrowed the guidance to, let's say, at least to the upper end, maybe EUR 140 million-EUR 150 million in terms of EBITDA? What made you hesitant in terms of being a little bit more optimistic?
We have not considered doing that, to be honest. Or let's say we have discussed it, but we have decided not to do that because we don't see a big advantage, for example, to say, we narrow the guidance and now say it's between EUR 135 million and EUR 150 million, because there are still two months to go. Please keep in mind that we also have fixed-price projects. You never know if something goes wrong, because this is always a possibility that one or two projects don't develop in the way that you expected, and that's something which you always, especially at the year end, which we will carefully review, and therefore there are always chances and risks, and therefore we have decided to leave everything in the way as it is.
But yes, it's fair to assume that there is a good chance that we will be, let's say, in the upper half of this guidance.
Yeah. Okay. Great. Thanks. See you in two weeks,
Great. Do we have more questions at this point in time? This does not seem to be the case, and I'll thank you very much for your interest in our call today and your participation. I wish you all the best and hope to see you in person, maybe on one of the upcoming conferences. For now, goodbye.