Ladies and gentlemen, welcome to the ATOSS Software SE Q3 2025 earnings call. I'm Moritz, the Chorus call operator. I would like to remind you that all participants will be in the listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Carla Leicher. Please go ahead.
Thank you, operator, and hello everyone. Welcome back to our second earnings call, where we will be discussing our results for the first nine months in Q3 2025. We are pleased to have you here with us today. I am joined by our Chief Financial Officer, Christof Leiber, and we are glad to have the opportunity to walk you through our performance and outlook. We will be referring to the Q3 and first nine months of 2025 earnings call presentation, which was published earlier this morning and is available for download on our Investor Relations website, as well as via the link provided in the webcast. The detailed Investor Relations presentation was also published this morning, which we encourage you to review for further insights, but will not discuss during this call.
Please note that today's call is being recorded, and the recording will be made available on our Investor Relations website after the call. Before we begin, I would like to start with a disclaimer. Please note that the presentation contains forward-looking statements based on the beliefs of ATOSS Software SE. These statements reflect the current views of ATOSS Software SE with respect to future events and results and are subject to risks and uncertainties. Actual results may differ materially from those projected here due to factors including, but not limited to, changes in general economic and business conditions, the introduction of competing products, lack of market acceptance of new products, services, or technologies, and changes in business strategy. ATOSS Software SE does not intend or assume any obligation to update these forward-looking statements.
With that, I will now hand over to Christof Leiber, who will walk you through the key developments of the third quarter of 2025. He will start with a general business update, then cover our financial performance, followed by our outlook for 2025 and beyond. We will wrap up with a Q&A session. Christof, over to you.
Thank you, Carla, and welcome everyone from my side. I'm happy to be here to walk you through our Q3 and nine-month figures for 2025. We appreciate the time that you take and your interest that you continuously put on ATOSS Software SE and look forward to sharing an update on our performance and outlook. Let's get started on slide four with key takeaways. ATOSS Software SE has delivered a very strong Q3 2025 in terms of revenue growth, profitability, and new order development. This strong development in Q3 not only supports the solid revenue growth of 11% in the first nine months of 2025, but also underpins our continued growth story that is driving our transformation to a recurring revenue model.
As order development was discussed more extensively after H1, where we reported a decrease in order development, yet equally indicated a robust pipeline and expectations to come in for the full year at par with last year. I'd like to expand a bit on order development. Order development for cloud and subscriptions is key to our business model and medium-to-long-term growth. Therefore, we are particularly pleased with the development of Q3 in this respect, and after Q3 for the development of the full nine months in 2025. Over the nine-month period, we have grown by approximately 14% in new ACV generation year on year on the cloud and subscriptions side. As cloud and subscriptions make up nearly 50% of total revenue, this is obviously more important than fluctuations on the on-premise license order intake.
The combined order development, meaning cloud and subscriptions and on-premise license order intake combined, according to our internal sales performance metric, came in at par with last year's performance by the end of September 2025. A significant improvement compared to H1 and indicating how strong Q3 really was. Moving on to margins, margins have been substantially higher than the forecast at the beginning of the year. We have been transforming and investing into our go-to-market organization, have done hirings, yet also enhanced efficiency and overall stayed focused on costs. This has developed quite a strong margin development, and we expect the margin development for 2025 to continue to stay strong. Because of the growth dynamic that we see, we are sure to complete 2025 as our 20th consecutive record year in a row top line and hopefully as well on the bottom line.
The revenue guidance stays at around €190 million in revenue, meaning a range of €187 to €190 million in revenue. This is purely based, or this range is really purely based on the weakness in on-premise license sales, whereas the performance on the cloud and subscription side is continuously strong, as I said earlier on, in particular shown in Q3. Based on the strong margin development within the first nine months of 2025, we are able to raise our guidance here for the full year to an EBIT margin of 34%. I would like to thank the ATOSS team overall for the performance in this environment. I have to say, going forward, an important Q4 in terms of order development and new ACV development in particular lies ahead of us.
We continue to expect an overall order development at par with 2024, and that the new ACV order development will show growth for the full year. Comparables, however, in Q4 are stronger than they were in Q3. There is quite a lot of work still to be done. As for revenue and margins in Q4 alone, for Q4, we expect revenues to be in the range of €48 to €50 million plus, with an EBIT margin between 31% and 34% in Q4. Now moving on to people and organization on slide five. As of September 30, our total headcount stood at 853, representing a slight increase from prior quarter and year-end levels in 2024, and obviously the prior quarter in 2025. With regard to our go-to-market organization, we have made continued progress. The transformation is overall on track.
A good buildup on the SDR side, assuring a stronger pipeline creation in 2026. Quality of and capacity of quota carriers is a focus point for transformation, and yet in parallel, we are using and looking at efficiency by using AI, digital tools, et cetera. We now expect the total headcount for sales and marketing by the end of the year to be in the ballpark of 200 to 210 people in the go-to-market organization, yet with a fully transformed organization. Headcount of quota carriers, including first-line managers, will be around 80. That's at least our goal, and that is in line with what we had planned for at the beginning of this year.
This will give us an increased and significantly improved organization in the go-to-market area for 2026, and at the same time, we will focus on enhancing the further digitization of this organization to create more efficiency overall. Overall, this will give us a much stronger muscle to grow next year and in our key growth markets, and also be less impacted by whatever the macro will hold for us. Now let's move on to our financial update and start with a look at our income statement on slide six for the period from Q1 to Q3 2025. We've delivered a solid first nine months of 2025 with revenues increasing by 11% year on year, driven by software revenue growth of 13%. As said, our cloud and subscription business continues to be a major or the major driver of this growth, with a 28% year-on-year increase in cloud and subscription revenues.
This revenue stream now accounts for 48% of our total revenues, up from 42% last year. For other revenue streams, some of them are equally contributing to our overall growth. Consulting showed a continued good growth at 10% year on year. Other revenues, including process consulting, improved even stronger with 31% year-on-year growth, whereas hardware revenues saw a decline in the first nine months in 2025. On the margin side, we stayed strong despite the investment into our go-to-market organization and its transformation. As said, we will continue to balance through a balanced buildup of efficiency gains through new digitization and some quality in headcount and capacity buildup in the go-to-market organization. Overall, we are very pleased with this development so far. Looking at the next slide, and on slide seven, looking at Q3 alone, the year-on-year growth has been slightly stronger: 12% top-line growth and 14% software revenue growth.
Also, the margin development in Q3 standalone was even slightly higher than on a nine-month basis. Overall, as I said, strong quarter, a very strong quarter in Q3 for auto-development revenues and margins, with particularly strength in the cloud and subscription side, in particular in auto-development. The new ACV generated by cloud and subscription has increased by 14% after Q3 for the first nine months. This will support the revenue development in the next quarters. Moving on to slide eight and taking a closer look at our cloud and subscription overall and overall recurring revenue ARR performance, we saw cloud and subscription ARR grow by 26% by the end of Q3 2025, and total annual recurring revenue grew by 17%. That, including maintenance and cloud and subscription revenue streams, until the end of Q3, a growth of 17%. That is what we had shown here.
With this ARR growth and on the back of the strong new orders for cloud subscription, the new ACV up by 14% for the first nine months, we are envisioning the cloud revenue growth to stay around 25% throughout 2026 as well. Overall, recurring should continue to grow in 2026 by plus minus 15% for the full year 2026. This is underpinned by a likewise strong backlog development for cloud and subscription and for total ARR backlog. Overall, we have therefore a good visibility of our recurring revenue streams for 2026. For the on-premise license side and for hardware, the visibility is naturally less clear.
Bearing in mind, this makes up only the on-premise side 4% of total revenue, hardware just 2%, whereas the recurring revenue streams are making up 70% and next year even more than 70% of total revenue. The value of ATOSS Software SE should be seen in the development of the recurring revenue streams. Looking at the cloud development by product, and thereby looking at slide nine, we continue to see solid figures. Our overall net retention rate remains at 111% based on the new ACV development in Q3. We expect this to stay at this level for the end of this year in 2025 as well. Overall, and medium and long term, we aim NRR rates for ASUS and ATC combined to stay above 110% and for Kumeister to be in between 91%- 93% going forward. Let's now turn to our cash flow and liquidity on slide 10.
Over the first nine months of 2025, we recorded a continued positive operating cash flow of nearly €50 million, yet below last year's numbers. This was primarily driven by high tax payments, mainly corporate income tax for 2023 and additional advanced payments for 2024 and 2025. Still with these higher tax payments, overall the liquidity increased despite the dividend payments of around €34 million that we had to do, or that we shared with the investors in Q2 of 2025. Given these effects, we closed at the end of Q3 with a liquidity position of nearly €126 million compared to €112 million at the end of 2024. With this strong cash reserve, we remain well-positioned to continue investing in the business while maintaining a solid financial foundation. Now, and this brings me to our outlook on slide 11.
I've already given some insight, but let me just repeat this here real quick. As we look back on the strong Q3 and solid first nine months of 2025, our focus turns to finishing 2025 as our 20th record year in a row. For Q4, we expect revenues to be in the range of €48 million- €50 million, with an EBIT margin for Q4 in the ballpark of 31% - 34%. By consequence, we remain optimistic about our overall revenue outlook for the full year, with expectations of coming in around €190 million. As I said, in this ballpark of €187 million- €190 million in total revenue, the risk is limited to the on-premise and the hardware development. Our growth on the recurring revenue side in total for 2025 should be approximately 18% year on year, and for the cloud and subscription side, 27% for the full year.
Very strong growth numbers on the revenue streams that make up 70% plus of the full revenue streams. With a strong margin development until the end of September 2025, our margin guidance is now increased to 34% for the full year. As said, this guidance will mark our 20th consecutive year of substantial top-line growth, and we are on track to meet our last medium-term guidance target set in 2022 with a CAGR of 19% all the way through until 2025. Looking ahead, our current medium-term guidance of €245 million by 2027, representing a 13% growth rate, remains unchanged. Of course, a lot will depend on macroeconomic conditions, our sales performance, and execution of the transformed go-to-market organization going forward, and a lot of other things. We still see a very good chance to come in by 2027 with this revenue number of €245 million.
Now, this concludes the presentation part of today's call, and we'd like now to open the floor for questions and are happy to dive deeper into any topics you'd like to discuss.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from Nicolas Herms from Deutsche Bank. Please go ahead.
Yeah, hi. Thanks for letting me on and congratulations on today's results. A couple of questions from my side. First, on the new order intake, I mean, very strong in Q3. I think on a standalone basis, at the very upper end of what was expected going into the results. I was wondering if you could give a little more flesh on where this strong acceleration in Q3 is coming from, if you noticed any difference in your different regions and customer segments. Second, did the surge in new order intake also stem from the reorganization of your sales organization and the new processes that you've implemented over the last couple of quarters? Is it too early for this to have a significant impact?
Thanks, Nicolas, for the question and very valid one. Let me dive in a bit deeper into the new order intake in Q3 in particular. In terms of customer segments, I mean, you know that we do have the enterprise area. We have the SMB area as two separate parts where we saw a development. Generally speaking, overall, SMB was continuing to be slightly above last year, with roughly 50% coming from new logos and 50% coming from existing logos. Enterprise sales were rather flat overall, and roughly 30% coming from new logos, 70%, so quite a substantial part from customer expansion from the existing customer side. Both areas significantly were seeing cloud and subscription order intakes rather than on-prem. On the prem side, we saw a decline, whereas on the cloud and subscription side, on both sides, we saw significant uptake.
Overall, as I said, the new ACV generated with the order intake was 14% for the nine months. I cannot give you the figure right now for Q3 standalone, but it probably was substantially higher than the 14% as the comparable last year was relatively low. In terms of regions, we saw some positive contracts on the international side, one retailer from the Benelux region and one retailer in the Middle East, so two international deals. We also saw strength on the healthcare side, one university hospital in Q3 in particular that we added to our customer list. That is very pleasing in the healthcare. Also, logistics on the existing customer side was meaningful in Q3. Where we still continue to see some weakness is on the manufacturing side, and in particular, there obviously automotive and suppliers or suppliers for automotive vendors.
Lastly, your question regarding the sales organization and whether this already or the reorganization transformation of the sales organization, whether this did have an impact on Q3 proper, that's too early to say. I don't, I really, most of the, at least the larger deals certainly were in the making already for 6 to 12 months. No direct impact there. In terms of pipeline buildup, maybe we do see some development, some positive impact there, but it's really a bit too early to tell. This will probably rather pan out in H1 2026 and show effects there. Yeah, hopefully I did answer this question. If you follow up, please go ahead.
Yeah, can I just ask one quick follow-up on Q4? I think SAP tonight, they sounded quite optimistic on Q4. I think they said deal momentum is accelerating. Given that you target similar customers, it would be interesting to know what you are seeing in terms of demand environment and customer behavior into Q4. In other words, I mean, you've commented on this already a bit, but I want to better understand how sustainable this very strong growth in Q3 order intake is.
I mean, we do have a robust pipeline. In terms of our visibility, in terms of the pipeline in general, it's very good. It's basically, as I've said, after the end of H1, where I said, despite the fact that in H1 proper, we were being a bit slower than the year before because of comparables, but also because of some deals that slipped. As I alluded to the fact that the pipeline as such was robust and a good visibility there. That is similarly the case right now as well. However, as we've now seen on the positive side in Q3, deals had been slipped from Q2 into Q3 and made Q3 looking much stronger. This may happen still in Q4 as well. It's a bit difficult to say. Pipeline-wise, we are okay.
Execution-wise, we have to see whether we really get everything done that we need to get done in the end of this year. At this point, I would say we do look optimistic in Q4 in terms of making the same volume overall as in the very strong Q3. That would be bringing us at par for the overall order development that we've seen in 2024. That's most important, it would indicate that we still will have, at the end of this year, an increase in new ACV development on the cloud and subscription side. That's what I can say to this, looking forward to 2026 as well. We just looked at our pipeline development for 2026, and from a pipeline perspective, it looks okay. We are envisioning some order development growth for 2026 compared to 2025 as well. There, from a pipeline development, it looks okay.
From a productivity development, it looks okay. It needs to be executed as well.
That's very helpful. Thank you.
The next question comes from Gustav Forberg from Berenberg. Please go ahead.
Hi, Christof. Thank you so much for taking my questions as well. I just have one. The environment for software buying or software selling, depending on which angle you look at it from, has obviously changed quite a lot this year. In Q3, it seems like quite a lot of software companies are saying that order momentum has returned a little bit, picked up, changed. What is it, in your opinion or in your view, that has changed at customers that have met Q3 a slightly better quarter? Is there anything in particular that customers have said or anything on the customer behavior side you would like to call out to sort of shed some light on the shift?
In the numbers, we've seen the shift. I'm still a bit doubtful on the macro, quite frankly. Our execution had been very focused after a bit of a disappointment in H1 that has added to the success in Q3 as well. I hope, hopefully, we can push this forward into Q4 as well so that we stay focused on the deals that we do have. Overall, I would say, and that's what I said in H1 as well, we are delivering an efficiency tool. We are delivering an efficiency tool in a highly complex environment. There's hardly strong competition there. It's really on us to make the case for the efficiency gains that customers can leverage through our tools. We do have a lot of good reasons going for us.
In the healthcare industry, for example, there is a ton of relatively old, I would say, legacy systems that are still in place. Our solutions are fully cloud-based with a new cloud-native stack. They open the door to AI technologies. We have delivered already four AI services on the forecasting side for general forecasting, for illness rate forecasting, for vacation rate forecasting, and other forecasting elements. Plus, we've delivered workforce intelligence. We've basically delivered a credible news flow to our customers that there is innovation to come and there's reason to move to the cloud, whether you are a new customer or whether you are an existing customer moving to the cloud. That has certainly helped in differentiating our offer. This will continue to be helpful for us as we are progressing on this journey to add new services in this direction.
As I said, in the H1 call, in the course of the next 12 to 24 months, we are envisioning topics like agentic AI services adding on this. This altogether against the backdrop of markets and customers looking for efficiency tools. In the particular field of workforce management, a vendor landscape that is different from other areas, I would say, and where we stand out in terms of innovation, in terms of investment capabilities, and in terms of references, that has certainly helped us. When it comes to the overall macro, I'm still a bit hesitant, but that's very much the reason why we believe that we had to invest and transform our sales organization to be a bit more independent on what the macro does so that we can deliver even in a tougher macro environment with good results.
Great. Thank you.
Thank you.
As a reminder, anyone who wishes to ask a question may press star and one at this time. It looks like there are no more questions at this time. I would like to turn the conference back over to Christof Leiber for any closing remarks.
Thank you, and thanks to all of you who have joined this call and for your continued interest in ATOSS Software SE. Let me just say that we are very pleased with this development over the first nine months, in particular with Q3. That pipeline looks good. We still have one quarter, an interesting quarter ahead of us where we will aim to execute as we've done in Q3. What is really a very positive development is that our cloud and subscription side of order development plus on the revenue side is keeping up or picking up pace in terms of growth. With that, we are looking forward not just to Q4, but also to 2026 with another year of consecutive growth. Thanks for your attention and looking forward for the next call in January 2026, completing our 20th record year in a row.
Ladies and gentlemen, the conference is now concluded and you may disconnect. Thank you for joining and have a pleasant day. Goodbye.