Ladies and gentlemen, welcome to the ATOSS Software SE earnings call Q1 2026 conference call and live webcast. I'm Vicky, the conference call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star then zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Carla Leicher, Manager, Corporate Development. Please go ahead.
Thank you operator, and hello everyone. Welcome to our Q1 earnings call, where we will be discussing our results for Q1 2026. 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 earnings call Q1 2026 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. A 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 obligations 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 first quarter of 2026, including our business and financial performance, an update on artificial intelligence, and our outlook for the year ahead. We will then conclude with a Q&A session. Christof, over to you.
Thank you, Carla, and a very warm welcome from my side to everyone on this call. I'm happy to walk you through our Q1 2026 results, current developments, and our outlook. At the same time, I'd like to thank all of you for your continued interest in ATOSS. Let's get started with slide four and key takeaways. We started 2026 with a continuation of double-digit revenue growth and margins above our guidance. Revenue grew by 11% year-over-year in Q1, driven by continued very strong momentum in our cloud business, which grew by 27%. At the same time, we achieved an EBIT margin of 35%, which is above our full year guidance. This strong margin development was supported by two factors.
First, the efficiency progress we are making through our internal AI efficiency and productivity initiatives, and the second effect that we saw was a technical effect from the revaluation of our long-term incentive programs. Turning to order development more broadly, ARR and cloud subscription order backlog year-over-year showed a continued double-digit growth. At the same time, we saw in Q1, from the beginning of March onwards, a certain level of caution in the market driven by macroeconomic and geopolitical uncertainty. Against this backdrop, overall, new ACV in Q1 came in at prior year level, which we consider a solid outcome. Positive to note, the share of new logos in our new ACV increased to around 50% this quarter, and this is compared with 30%-40% in the previous year. One area that clearly stood out positively was healthcare. We saw a strong momentum in this sector.
Among others, we have one very renowned new customer in our healthcare practice, the Berlin Charité, and are very proud to have this large hospital right now among our healthcare customers. We continue to see a robust pipeline in healthcare, so going forward this will hopefully help us in the next quarters. Healthcare is a highly regulated environment with a large operational workforce working 24/7, and it is exactly these characteristics which are in demand for structured workforce management and increasingly for AI-based forecasting and planning support. This directly links to our broader progress in AI in Q1, where we continued to execute consistently on our AI roadmap on the product side, while at the same time leveraging AI internally to improve efficiency and productivity. These internal initiatives are already contributing to higher operational leverage and more scalable cost structure.
We expect this to allow us to significantly increase output over time while keeping costs well under control. Finally, let me briefly touch on our outlook. We continue to guide for revenues of around EUR 215 million for 2026, reflecting here the possibility of a negative deviation of up to 2%, i.e., a range of approximately EUR 210 million-EUR 215 million in revenues for this year. This is in line with what we have said on our earlier conference calls in this year. Based on the efficiency gains we are seeing, both from operational execution and from AI-driven productivity improvements, we are confident in our margin trajectory. As a result, we are able to update our EBIT margin expectation for 2026 to at least 34% as an EBIT margin for the full year.
Now with that, let's move on to the income statement on slide 6, comparing Q1 2026 with Q1 2025. As mentioned, our total revenues increased in Q1 by 11% year-on-year. This growth continues to be driven by software business, which grew by 13% year-on-year and accounted for 74% of total revenues now. Within software, cloud and subscription revenues remain the key growth drivers. This line of revenue increased by 27% year-on-year and now represents 53% of total revenues, compared to 46% of total revenues in the prior year first quarter. Maintenance revenues declined by around 3%, which is fully in line with our expectations, given our ongoing shift towards cloud. Looking at the remaining revenue streams, consulting revenues increased by 11% year-on-year, reflecting continued solid demand.
Other revenues grew by 12%, while hardware revenues declined by 24%, which constitutes, however, only a very small fraction and share of our overall revenue base. With the top line growing, we achieved an EBIT margin of 35%, up one full percentage point compared to the prior year quarter. Let's now take a closer look at the development of our recurring revenues comparing Q1 2026 with Q1 2025 on slide 6. Starting with total ARR, which includes cloud and subscription as well as maintenance, total ARR increased by 17% to EUR 148.1 million in Q1 2026.
Looking specifically at cloud and subscription ARR, we saw again an increase of 27% to EUR 109.8 million, so nearly EUR 110 million in Q1 2026. When looking at customer value dynamics, our net retention rate came in at around 112% for Q1 2026, sitting slightly above the rate that we had for the full year in 2025.
A positive development overall there as well. Now turning to our backlog, which provides good visibility into the future recurring revenues, our total ARR backlog for the next 12 months increased by 16% to EUR 152.5 million. This reflects a solid level of contractually committed additions and continues to underpin our revenue visibility and guidance for the upcoming quarters. Looking at the incremental cloud and subscription backlog added year-on-year, we see a stable development. Again, we added EUR 21.5 million in Q1 2026 compared to Q1 2025.
Given the ongoing macroeconomic and geopolitical uncertainties, maintaining this level year-on-year demonstrates the resilience of demand for our cloud offering. Now let me turn to cash flow and liquidity on slide 7. In the first quarter of 2026, operating cash flow increased significantly compared to the prior year quarter, from around EUR 20 million in Q1 2025 to around EUR 39 million in Q1 2026.
The year-on-year increase in operating cash flow is largely explained by a one-off tax effect, reducing the cash flow in Q1 2025, so now showing up as positive, in the operating performance in Q1 2026. Turning to liquidity, at the end of Q1 2026, total liquidity stood at around EUR 162 million, up from approximately EUR 123 million at the end of the year 2025. Overall, this leaves us, as always, with a very strong liquidity position. Let me now turn to outlook on slide 8, based on the solid start in the year, we reconfirm our revenue guidance for 2026. We continue to expect total revenues of around EUR 215 million for the full year. As mentioned in the beginning, around reflects a prudent bandwidth. Based on our current visibility, this means we expect to land within a range of approximately EUR 210 million-EUR 215 million in revenue.
On profitability, reflecting the efficiency gains we see, we are raising our EBIT margin guidance. For 2026, we now can expect an EBIT margin of greater than 34%. For 2027, we continue to target total revenues of around EUR 245 million, i.e., implying there is a possibility of a negative deviation of around 3%. Hence, we expect a revenue CAGR in the range of approximately 12%-14% for 2026 to 2027 combined. Naturally, the exact trajectory will depend on macroeconomic conditions and our execution, i.e., for more clarity in 2027, we have to wait until later in 2026 and/or the end of 2026. Moving on to people and organization on slide 9. At the end of Q1 2026, our total headcount stood at 862 employees compared to 856 at the year-end 2025.
This reflects a moderate and largely planned development in our organization and remains fully aligned with our strategic priorities. Regarding our go-to-market organization, we are now where we intended to be from a people perspective. As of Q1 2026, our sales and marketing headcount stood at 207 employees, which is fully within the targeted range. Importantly, a significant share of our current account executives has joined over the course of the past quarters and is still in the ramp phase. As these colleagues progress along their ramp- up, we now increasingly expect to see productivity feeding through step by step. At the same time, improved processes and the use of digital processes and AI-supported tools are helping us to accelerate this ramp-up and further increase productivity.
Overall, this means that from a go-to-market perspective, our focus is clearly shifting now from capacity and process buildup towards sustained productivity, efficiency, and execution quality. Therefore, we currently do not see the need for significant headcount expansion despite ongoing growth opportunities. Instead, our priority is balanced productivity gains from AI with operational efficiency. This may also imply that for certain areas, we allow headcount to remain stable over time without constraining our ability to deliver or innovate. In parallel, we continue to invest selectively where it creates the most leverage. This includes, for example, the buildup of our AI development hub in Bangalore. Together with capacities in Romania and Germany, this setup allows us to strengthen our AI capabilities in a focused and scalable way on the product side. With that, let me now turn to the artificial intelligence on our roadmap on slide 10.
Before we continue, I'd like to quickly share our current observation about the market demand for AI. We see a growing interest in our AI services across our customer base, although demand currently differs by industry. In healthcare, for example, since we announced the future AI services would be released only on cloud infrastructures for our cloud customers, all medical customers opted for cloud. Since the availability of our first AI forecasting features, all new enterprise customers have these services in healthcare as part of their selected product packages. Also, in retail, we observe some traction. Approximately 1/3 of new customers embedded AI services in their packages. However, in other industries, demand is still at an earlier stage, so what we are seeing today is not a uniform wave across all sectors. It is a general interest and a specific explained and pronounced buying interest in certain industries.
With this said, let me come back to our roadmap, which we believe will increase the appetite for AI services with current and future customers alike. It also makes it even more important for customers to move to our cloud offerings. Today, our AI features already help customers improve planning quality, for example, through absence rate forecasting and workforce intelligence, making risk and inefficiencies visible earlier and more reliably. What comes next is to take this one step further, not only identifying better decisions, but making complex compliance critical tasks easier to execute in a day-to-day operation. Agent-based services do exactly that. They reduce the need for deep system expertise by taking over routine, guiding users through complex workflows, and supporting that crucial steps are completed correctly and consistently. Let me make this concrete with one practical example.
The next AI feature we plan to release in Q2 2026, so this year, is an agent for our ATOSS clients, starting with Insight and then moving into the Action part. To illustrate what this means in practice, consider the onboarding of new employees. Every time a new employee joins, they must be assigned to correct working time models, or if none fits, new models need to be created. Today, this is, of course, still a very complex task. Administrative staff needs to translate contract terms into working time models that combine shifts, weekends, start and end times, breaks, rounding rules, and salary supplements, all of which are critical from a compliance perspective. With the new ATOSS agent, this process becomes much simpler.
The agent asks only the relevant questions, ensures that no parameter is missed, and proposes the correct working time model or helps create a new one if required. This results in significantly less administrative efforts and enables less experienced employees to complete these steps correctly and consistently. This is just one of the capabilities of this first ATC agent. It also supports in creating replacement suggestions if an employee is ill, et cetera. This starts in Q2 with support on the Insight side and continues in the coming periods with the Action side of this agent. Let me give you another example of agentic support with our solution, this time based on our first ATOSS Staff Center agent that are planned for release starting in Q4 2026. Consider a frontline worker returning from parental leave who suddenly needs time off for their child's daycare onboarding.
Instead of searching policy documents, figuring out what is allowed under the contract, and worrying about pay compliance and other implications, the employee can simply describe the situation, even by voice, sounding like this: "I might need to leave early or take a day off. What are my options?" The Staff Center agent then interprets these requests, checks the relevant policies and contract context, and proposes concrete compliant options, explaining the impact and guiding the user through the next step, such as adjusting the shift or initiating appropriate request. Let me give you yet another example of an agentic support in our solution, this time based on the first version of the ATOSS Expert agent planned for release in Q4 2026 equally. Imagine a store manager starting Monday morning, 47 leave requests from her team on her desk.
The challenge is not to approve them quickly and just approve all of them. The challenge is approving them responsibly without breaking coverage, without violating rules, creating no problems on shop floor later in the week. For example, approving a request that would trigger shortfalls on Saturday. This is the task. With the ATOSS Expert, all 47 requests have already been checked over the weekend against staffing levels, required skills, contract rules, peak demands, and are preselected and grouped by risk. Requests that are safe to approve, requests that would create gaps, requests that need clarification. Crucially, every recommendation is explainable to the manager, so the manager can see why certain requests are safe and why others are not. The more typical takes around an hour of manual work or even more sometimes is reduced to just a few minutes.
On top, the quality of decision increases through better consistency and transparency. Let me say on top of that, on each of these steps of making decisions, there's the human in the loop, the manager in this case, who ultimately makes the decision. We have good control and good guardrails in place as well. Again, also for ATOSS, these examples are just a small part of the capabilities of the first ATOSS Expert Center AI agent, meaning the AI agent can be used for lots of other use cases as well, predicting reduced coverage rates in the future and its consequences on illness rates, overtime, et cetera, proposing scheduling mitigation to predicted reduced coverage rates, et cetera. Collectively, these agent-based capabilities fundamentally change how people work with workforce management systems, and our focus is to continuously evolve this and remain the best-in-class solution for our customers.
Coming from our Workforce Management Day, I can say there's excitement, and at the same time, for a lot of customers, it means that they now understand why to move to the cloud. Finally, a brief word on how we use AI internally. Around half of our software developers use Claude Code. Since mid of March, all of our developers have access to Claude Code, and by the end of next quarter, we target to have more than 70% of our coders actively using it across the company. Around 70% of employees already use AI tools on a regular basis, and about 50% already use them on a daily basis. We invest regularly in training, adoption is strong, and productivity effects are clearly visible. Hence, our margin guidance can be increased. Overall, AI is not a future topic for us.
It is already becoming part of how we build products and run the company today, and that is on every level. Now, this concludes the presentation part of today's call. We'd now like to open the floor for questions and are happy to dive deeper into any topics you'd like to discuss. Thank you.
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, then 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. The first question is from Nicolas Härms, Deutsche Bank. Please go ahead.
Yeah. Hi. Thank you for letting me on. I have a couple of questions. I think it's easiest if I just ask them one by one, and the first one would be on the geo and macro weakness that you've mentioned. I was just wondering if you are seeing any differences in the international versus the DACH business and if there is any sector that is particularly affected and if there's a difference between the new customer and existing customer business?
Hi, Nicolas Härms. Thanks for putting all these questions. On the geo macro, let me say first this, we started this year very strong, I have to say, on the new ACV side, and that led to development that all the way until the end of February, we were significantly above last year. Everybody knows on 28th of February, I think things have changed a bit. Energy prices went up and that has led, not the pipeline to change, the pipeline still is very robust, but the conversion within the pipeline and the time accuracy of customers or potential customers following through with their decision process. That's quite understandable, I believe. That was particularly pronounced in areas that are not public sector. In public sector, I mentioned healthcare, we saw a positive development, continuation of positive development as well.
in other areas, like manufacturing in particular, we saw this development. If I wanted to break this down by versus DACH versus international, I don't really see a difference here, really, I have to say. Although, obviously, our international practice is a bit more limited, so it's, for me, difficult to call this out as a statistical number. In international, we actually have seen quite a good development, actually, because we have been successful in winning a larger expansion of one existing customer, a French customer there, in logistics, with whom we have signed last year a deal for, I think, the Benelux. They have been very pleased with the development in the Benelux region, Belgium and the Netherlands, and are now expanding substantially. this was quite a large deal that we won in Q1.
It's a French logistics company which continued their confidence in a further rollout with ATOSS in the next years. In the DACH region, I would say in terms of new logos and existing customers, we were, as I said, seeing a positive development in this for the entire quarter in new logos overall. Obviously, we had hoped for a bit more, but it was a positive development because 50% of our, slightly more even, of our overall new ACV came from new logos, and that was on the backdrop of 30%, I think, in Q1 last year and 40% for the entire year of last year. Good continuation of the development in the new logo side.
Yes, we had hoped for a bit more, and to give you an idea there, adding to this time topic that customers, the pipeline has not changed, the conviction of customers to ATOSS or to the workforce management side has not changed. The deciding point of doing it just now in March was probably for some customers a bit difficult. Two of those have directly signed after in April, but as we report on quarters and not on time frames that are leading up to today, these were obviously not counted in Q1. In terms of enterprise, SMB, and other areas, enterprise was actually above last year. Generally a good development, which we had hoped to be even stronger, but still above last year. SMB was, from our perspective, quite a disappointment, and maybe it's showing that the uncertainty is even increasing on the level of SMB customers.
In particular, they're on the new logo side, they're quite different from the enterprise side. That's the color that I can give you. On top of that, if there's anything else you would be interested in, please follow with a follow-up question.
No, that's already very helpful. I just had another question on the new cloud ACV. I think on one of the previous calls you mentioned that you need, I think EUR 5 million-EUR 6 million in new ACV to get to the EUR 215 million in revenues. In Q1, the incremental cloud order backlog added was flat. Just wondering if we should expect the lower half of your revenue guidance range for 2026 as of now?
Okay. Fair question, and yes, in nuance. Yes. What I said on earlier calls was that for the entirety of this year, we would need the incremental order backlog added at the end of this year to grow on top of last year and not stay flat. Growing would mean roughly 10% growth. That would imply that by the end of this year, so at the very end in Q4 this year, the incremental order backlog added for the 12 months before, so in the course of this year, would need to be in the ballpark of EUR 25 million, but not really for the year 2026, rather for 2027. In order to do the 2026 guidance, we are currently in line with our projections, so we would be still seeing us in the middle of the bandwidth that I gave. Around EUR 215 million, meaning EUR 210 million-EUR 215 million .
The middle thereof would be EUR 212.5 million , something like that. That's what we see currently, and that's mostly driven, but not by the new orders for cloud and subscription. That is sufficient for even the upper end. It is the perpetual licenses still that are still falling short of even the level of last year. In the first quarter, we saw a decline there of 40%, I guess. Of course, in our overall, as it just makes up 2%, 3% of our total revenue, it's not so important, but it makes the difference between this bandwidth. Currently it's really more for this year, it's more the perpetual licenses that play a role. For 2027, however, we need to step up. Let me add there, the pipeline is there. We do have still a good pipeline.
It is about the conversion rates, and the conversion rates of that pipeline, and the timely conversion of that pipeline has to do with two things. One, with the macro. This would need to light up in order to really fall through. Of course, secondly, it has to do with our own ability to execute. Here we still are stepping up the maturity level of our sales organization. Capacity-wise, we are okay. Process-wise, we are okay. Maturity level-wise, we still have to step up, and this will happen in the course of this year.
All right, thank you. Just one final question would be, I think in the beginning you mentioned that margins benefited from one-offs related to the reevaluation of the long-term incentive program, if I got that right. How much of a tailwind was that exactly in Q1?
That's right. The tailwind was roughly 1 full percentage point in EBIT margin, and that basically the revaluation of the long-term incentive, in particular of board and others, did play a role here.
All right. Thank you.
Thank you.
The next question is from Gustav Froberg , Berenberg. Please go ahead.
Hi there. Thank you for taking my questions as well. Just one follow-up from me. I wanted to ask about the cloud migration dynamics for your existing maintenance subscribers or maintenance customers. How much of your business on the cloud side was driven by migrations in Q1? And how should we think about the evolution of cloud migrations as we progress through 2026?
Yep. Very important point. Just allow me to expand a bit. Yesterday, we had our Workforce Management Day, and I was really excited, and I think a lot of our existing customers were excited as well, to see live on stage what I shared with you today, but really live. It doesn't make a whole lot of difference to see this AI agent operate and actively communicate with a person and solve problems. We had another speech there where it said, "Hey, cloud is really the prerequisite to move to or to get access to these AI agents." With a lot of these customers, we had like 700 people there, a ton of customers and resellers and lots of people.
With a lot of these on-prem customers that we have, I think it made it click, that in order to get to the door to AI, and then you have to kind of go through the door as well, to actually leverage AI, you first have to move to the cloud. I really hope that this kind of ignites a bit of a migration going forward. In the first, just to put this with clear numbers, in the first quarter, in this ARR bridge that you'll find in the full deck of the presentation, there we have the new customer ARR expansion illustrated, and I think that has been EUR 12.7 million in the reporting period. Roughly 1/3 thereof, so EUR 4 million, comes from additional migration.
As I said in my speech here, the negative revenue development of the maintenance revenue, - 3% year-on-year, that is exactly customers moving into the cloud already. We do have prominent customers like STIHL and others in Germany who have moved last quarter. There needs to be a stronger wave going forward in order to get access to the functionalities, but also in order to have a long-term positive effect for us and for the customers.
Great, thank you. A quick follow-up on the same topic. Do you see customers moving in conjunction with an SAP migration as well, or are the two not really correlated and the customers are happy to just migrate on the ATOSS side without thinking about the rest of their tech stack?
Well, overall, we continue to have a strong SAP Endorsed App partnership, in particular with new logos, I have to say currently. With the migration trend, I would have to look into deeper myself. But on the new logo side, we are pleased with how the partnership goes, and I think there's a lot of value on both sides in it. Yesterday in our Workforce Management Day, there was a booth from SAP SuccessFactors as well. Tremendous value on both sides, in particular in the healthcare, but in other areas as well, where we can collaborate perfectly together.
Great. Thank you.
Thank you.
As a reminder, if you wish to register for questions, please press star and one on your telephone. At the moment, there are no more questions registered. I would like to turn the conference back over to you for any closing remarks. Thank you.
Well, thank you, and thank you for the continued interest in ATOSS. I think we've proven once again that we started with a very solid Q1. We have a strong leverage on our margins because of our own internal efficiencies. Our business model seems to be very resilient, even in these macroeconomic environments. Yet going forward, we are looking with a positive view on our pipeline and have to execute on this in order to really show the case for even stronger growth, hopefully in the full year and the years to come. Thanks for your interest, and I'm looking forward to the half-year earnings call and all the exchanges in between with the entire investors community. Thank you.
Ladies and gentlemen, the conference call is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye