Welcome, ladies and gentlemen, to today's earnings call of Bechtle AG, held in connection with the report for the third quarter of 2026. I would like to welcome Konstantin Ebert, current COO and designated CEO of Bechtle. We will begin with a presentation and will then be happy to take your questions personally via the audio line. With that, I will turn the floor over to you, Mr. Ebert.
Thank you. Good morning, ladies and gentlemen, and thank you for your interest in our Q3 earnings call. We appreciate you joining us. After the farewell of Thomas Olemotz from this community at the Capital Markets Day, this is the first call led by myself and my dear colleague Christian Jehle, our CFO. We are confident to build the same level of trust and interaction with you as Thomas Olemotz has done, and we look forward to the times ahead. I will start in a minute with our presentation, and Christian will follow with deeper insights, and I will close. We will then be more than happy to answer your questions. I would like to share some highlights about our Q3 now. Our order backlog has further increased and reached a record of EUR 3.6 billion.
In the third quarter of 2026, we continued to deliver strong growth across segments and customer groups. Earnings before taxes increased with a broadly stable margin on business volume. Our operating cash flow improved compared to the second quarter. Most importantly, we raised our full-year earnings outlook again.
Acquisitions and increasing European presence. Our acquisitions continue to strengthen our presence across Europe. Interforce expands our managed services business in the Netherlands and increases recurring revenue. They are a highly automated MSP with the ability to scale even outside the Netherlands. ITQuotes, our first acquisition project in Ireland, provides access to new customers and upside for our service portfolio. With this, we double in size, and they can now leverage our broad portfolio. The Kaut-Bullinger division strengthens our market leadership in HP's 3D printing in Germany and Austria.
In the U.K., Bespoke XYZ adds expertise in AI, data analytics, and Microsoft Power Platform, laying the foundation for our AI unit in the U.K. and Ireland. Bespoke XYZ has been a partner since a couple years and is efficiently building AI adoption at our customers. Maybe worth mentioning that these have been the most recent acquisitions of this year, and the year has not come to an end yet. Also worth mentioning that these acquisitions do not just bring volume, but bring expertise and skills to us that we will leverage across. Public sector digital transformation. For the Bavarian judiciary, we secured a framework contract worth up to EUR 250 million, covering roughly 17,500 IT workplaces with a high proportion of services. For schools in the federal state of the Saarland in Germany, a framework agreement worth up to EUR 80 million covers Apple iPads, accessories, and services.
And funding has also been awarded for IQM quantum computing resources for the DLR quantum initiatives. We are winning in services, in strategic broad deployments, as well as in future technology environments. More and more, we are positioned as a valuable partner for the digitalization far beyond hardware.
Our growth internationally in public is as significant, and in Q3, our growth in public sector across the group has reached 35%. Recognition of our AI expertise. We have achieved NVIDIA's highest partner level for AI infrastructure, and we joined the Microsoft AI Business Solutions Inner Circle, which brings together leading AI partners worldwide. ISG has also recognized us as a leader for AI-enabled workplaces in Germany and Switzerland. AI is a field of strategic investment for us, and we will support our customers on their AI journeys. Finally, we also have made progress in sustainability and digital sovereignty.
For the first time, we achieved the EcoVadis platinum status, placing us among the top 1% of IT companies assessed worldwide and giving us a unique value proposition. We also launched a partnership with secunet focused on sovereign cybersecurity and solutions for critical infrastructures. With this selection of highlights, I would like to hand over to Christian Jehle for more insights.
Thank you, Konstantin. Good morning, everyone. When we look at the Q3 financial highlights, I think it's fair to say that the third quarter is another very successful quarter for Bechtle, the third one in a row this year. We've shown double-digit growth in business volume and in earnings as well. When we look at the details, we see that business volume is up by 19% year-over-year. We see a broadly stable EBT margin, and when you look at our KPI of EBIT as percent of gross profit, we also have improved productivity in the third quarter. When we look at the details of the Q3 results, you see the improvement on the top line and on the bottom line as well. You see organic growth numbers in business volume terms of about 18%.
When you look at our gross profit in Q3, it reflects a selected number of large transactions which we took deliberately on board. Therefore, when we look at the underlying performance, it's a very strong performance in that part of our business as well. When we look at EBT, we see double-digit increase in EBT, and our EBT margin is largely stable despite our higher 2025 comparables. When we also look at our operating business and the operating leverage that we have, our strong cost discipline and the measures that we're driving to increase productivity, they already show results in the KPIs that we're publishing. When we look at order backlog and business volume, we see that order backlog is at a new record high at EUR 3.6 billion, and we're benefiting from our customer proximity.
We show a backlog growth of 33% against prior year. Therefore, we also show very strong business volume momentum in our business around the world. When we look at EBT and the EBT margin, the EBT margin is in line with prior year despite our incremental investments into our own IT. We have shared that with you over the last three quarters that we make significant investments into our own IT to drive productivity. So EBT is up by 14%, and we show a sequential margin recovery and a very stable year-on-year profitability level. When we look at business volume and the EBIT split by segment, what you can see on the chart is you see the strong contribution from our home market in Germany, and you see our international segments performing in line with growth expectations.
Germany, as the main contributor, is growing on top line and bottom line. Therefore, we once again have demonstrated our strong position in the German home market. But we also show the strong level of diversification across our European business. The international business part is steadily increasing, thereby underlying our resilience in the business model that we have. Therefore, as a result, we show broad-based EBIT growth. When you then look at business volume and EBT margin by segment, what you can see is that our growth was broad-based across all segments, with all customer groups contributing. Konstantin was already talking about the strong performance in the public sector, and when you look at all the segments around the world, we show growth in all regions. Germany, with the strongest profitability, is clearly visible, as it is our most established business.
It has the most mature business structure. Therefore, you see the margin profile on the chart. But we are very confident that our international segments will follow their path, and we will also improve profitability in those areas. When you look at the segments' development, and we have put a few highlights together for each of the segments here, so let me just talk about a few of those. I think what you see overall is the proximity to our customers combined with European footprint and our excellent vendor relationships, they underpin the resilience of our business model. So just to talk about a few aspects of what you see on the chart. First of all, you see strong organic growth in Germany, and we continue to gain market share in our home market.
France remains a challenging market, and I think it is fair to say that any foreign business driving a VAR business in France, it is a challenging environment. So we see growth at 5%, and we also see positive development in the sense of our strategic initiatives to grow share in public sector business. There we see first progress, and we shared that with you in previous quarters. We have set up a new supply chain in France, so therefore, our new warehouse there is also up and running. I think what you can see across the board is that we have a very resilient international portfolio, and we have a very successful local approach combined with customer proximity. Let us talk about cash flow. When you look at the picture overall, I would say that operating cash flow improved significantly against the second quarter.
When you look at our working capital performance as a percent of business volume, that shows significant improvement. You see a strong operating growth, particularly in September, which led to temporarily higher working capital requirements in the third quarter. When you then double-click on that kind of performance and you look at our working capital in relation to our business volume, we've improved that metric. When you look at other metrics, we've shown improvements there as well. Our DSO has come down by two days from 38 to 36, and we show an improvement in that part of our business as well. I would say the main drivers of cash flow performance are the buildup of inventories. All the buildup that we have here is covered by orders, so there is no additional risk in our inventory.
Therefore, overall, I think it's fair to say that we have significantly improved our cash flow performance. When we look at our employee base, we've shown headcount growth year-over-year, but that is only driven by acquisitions. When you look at the underlying performance, organic workforce has come down slightly. Despite our cost cautiousness, we continue to invest in our talent pipeline. I think we've also shared the announcement with you that we have now a new VP for HR and people development that has come on board earlier this month, and we're very pleased to welcome Nicole on board. When you look at the first discussions that we see, I think she's landed really well, and we have great expectations coming from her. Let's talk about productivity.
On the chart, you see the key levers that we have identified to drive productivity that we shared with you at the Capital Markets Day. I think it's fair to say that we're making progress in all areas. The first area that we're focusing on is global process harmonization. The second area we're focusing on is our go-to-market approach, and the third area is technology and AI. In all of these three areas, we're making significant improvements, and Konstantin shared some of that already. Therefore, we have expectations that this is going to pave the way for our 2030 EBT margin target of 5% of business volume. Let's talk about the outlook for 2026. Now, after our performance that we saw in the third quarter, in combination with a strong order backlog, we decided to upgrade our outlook for the year 2026.
Therefore, when you look at the chart here, you see the major change is the EBT growth figure. We have upgraded that from previously 5%-10% to more than 10%, and that is on the back of three quarters in a year strong performance in combination with the strong performance that we see in terms of order backlog. That was all from my side. With that, back to you, Konstantin.
Thank you, Christian. I would like to summarize a few key takeaways before we open to your questions. Our business model remains resilient in a still challenging market environment, and we continue to gain market share. We continue to invest in our own IT infrastructure to further improve productivity. We also expect that the higher price levels will persist over the coming months. The growth momentum stays strong. We expect further growth in the foreseeable future, both organically and through acquisitions. Thank you very much.
And dear participants, we move on to the Q&A session, and we'd be happy to answer your questions directly via the audio track. To do so, please click raise hand, and I will grant you permission to unmute yourself. If you're dialed in by phone, you can raise your virtual hand by pressing star nine on your telephone keypad and wait for further instructions. And we have some participants. I hand over to Florian Treisch. Mr. Treisch, you should be able to unmute yourself and state your question.
Good morning. Can you hear me?
Yes, we hear you.
Good morning, gents. Thanks for taking my questions. First of all, on, let's say, the non-hardware, non-services part, I mean, software cloud business, outstanding performance, up 60% year-over-year. Can you shed some light? You mentioned in your presentation some larger, let's say, maybe one-off contracts in that kind of number. Can you add some colors on what you believe the underlying trend is? And the second, basically the flip side of the story, hardware revenues are, what I would believe, a bit behind what we expected or maybe also decelerating a bit. Can you add some details in this kind of trade-off, higher prices versus volume pressure? You mentioned in your closing remark that you expect pricing to stay high.
Do you expect kind of the market clients to adopt to higher pricing level that you would expect the coming quarters be much more driven by volumes again, or do you expect budgets simply to stay where they are today? Thank you.
Thank you for the question. Maybe let me take the first one, and Konstantin will take the second one. The comment around product mix and impact that it has on margin, obviously, we can't share any customer details, but what we wanted to comment on was that, in particular in the third quarter, we had some rather large transactions with a rather low margin, but an absolute contribution to our EBT number that we took deliberately on board. And we were obviously thinking about the impact that it would have on the gross margin year-over-year. Therefore, when you look at the minus 1 percentage points, the biggest portion of that is some very large transactions that we took, and they were across Europe. Obviously, can't disclose any customer details, but those were specific transactions that we took on board to add to our absolute EBT number.
That's the whole story behind that.
From my side, we believe that the price levels will remain high. They will actually also, as far as we can foresee it, from our vendor discussions, they will also remain high in the next year. There might be still increases, not on the spiky level that we have seen this year, but there will be a continuation of price increases in the hardware sector. The impact on our own business, especially this year, with the spikes that we have seen, forced customers to reallocate budgets. That, in some elements of the hardware, especially around the workplace, had some impacts on units because investments were delayed, because were shifted to data center business. Overall, in some segments, the unit growth has been healthy. In some, it was a little bit slower, but covered up by the price increases.
Generally, when we compare with the numbers that the vendors show how they perform in units and what we see around us happening in the market, we believe that we have a very strong performance there.
Okay. Thank you very much.
You are welcome.
Thank you, and we move on to Yannik Siering. Mr. Siering, you should also be able to unmute yourself and ask your question.
Yeah. Good morning. Can you hear me?
Yeah, we can hear you.
Thanks. Thanks for taking my question. I have also two, maybe another follow-up. The first one would be on cash flow and working capital. You mentioned the drivers, and that is understandable. We now stand at -EUR 131 million after nine months. You did mention that also inventory is tied to projects mostly. Could you maybe just give some color on what you mean with significantly positive operating cash flow for 2026? I mean, we have seen very strong Q4 levels last year and especially the year before that. Yeah, that would be helpful to get a feeling for timing.
Then the second one would be on just housekeeping on the financial results. Financial expenses were now roughly EUR 12 million. Is that the broad run rate that we can assume for the convertible and the Schuldschein also in Q4 and then going forward?
The last one on public sector. You mentioned the very strong growth across the group. Is that something that you also see now in the current quarter continuing, as usually the fourth quarter is especially strong in the public sector? Thank you.
Okay, so let me take the first two, and Konstantin will talk about the public sector. First of all, in terms of cash flow performance, obviously we do not guide on cash flow performance for the year. Therefore, what I can share with you is that we will continue to manage cash flow very tightly. You see movement in our cash flow figures mainly driven by inventory, and I think it is fair to say with the growth rates that we see, to some extent inventory levels will grow. But we expect a positive performance for the entire year in terms of cash flow performance. Therefore, there will be some movement in the fourth quarter. How much exactly, obviously we do not guide for that. But what you can expect us to do is in the fourth quarter, we will manage it in line with the first three.
We expect an improvement in underlying performance in terms of days of sales outstanding and the management of the inventory level. Whenever we take inventory on board, it will always be covered by specific orders, so there is no risk in the inventory number. When you look at our financial expenses, obviously the Schuldscheindarlehen, as you rightfully said, is putting some pressure on these numbers. If I were you and if I had to look forward, I would probably see a similar number also for next year. We took that amount on board to fund future acquisitions, as you might expect us to do. We continue to monitor the marketplace. Konstantin talked about the acquisitions that we have made recently.
We are spending the money that we took on board, but obviously we want to spend it wisely, and we want to make sure that we create the right leverage there. The short answer to your question is, should you expect the same level? Probably yes, but we also obviously deliver a return out of the investments that we make there.
Let me answer your question regarding the public sector. We continue to see a very strong growth in the public sector. Nevertheless, we are running against a very, very strong Q4 of last year, but we are not concerned as of now because we see a continuously very high demand in the public sector, not just in Germany, but across Europe, and we are winning significant frame contracts all over.
Great. Thank you.
You are welcome.
Thank you, Mr. Siering, for your questions, and we move on to one participant dialed in by phone. Martin Jungfleisch, you should be able to ask your question. First of all, unmute yourself, please.
Yeah. Hey, good morning, everyone. Two questions from me, please. The first one is just on 2027, if you could share some initial thoughts on that. How do you see initial development and the environment really going into 2027? Do you see that due to higher hardware pricing, customers are increasing IT budgets to basically require IT needs, or would you expect a similar picture as you've seen in the years before, where customers really need to prioritize purchases in a given budget? That's the first question, please.
What we've seen this year is that customers, by the price spikes, were forced to reallocate budgets. They had to. Necessary investments in hybrid cloud infrastructures, in AI workloads, and so on, drove them more towards the data center investments and a bit away from the workplace investments. We think that this needs to be followed by stronger investments in workplace as well. We do think that there will be a positive trend going on there next year, and customers will now, towards the end of the year, of course, work on their budgets and reallocate to the new pricing levels. As I mentioned earlier, we believe the prices will stay high. We believe that they will continue to grow, but on a much lower and less spiky way than this year. But we believe that there will be some reallocations of budgets going forward.
Overall, we strongly believe that the implementation of AI workloads, the building out sovereign infrastructure, the digitalization of all the governmental entities, and so on, that the IT industry in general will still see very, very strong investments going forward. So we believe that we are in a very good spot there.
Okay, thank you. Secondly, it's mainly on cost. If I look at the Q3 cost level, selling and admin were down sequentially versus the Q2. Is there certain reasons for the lower fixed cost base? Maybe also, how should we think about this going into Q4 and 2027? I mean, you're not the most energy-intensive business, but in what way would you see yourself being impacted by raising energy labor, maybe also some shipping costs into Q4 and also 2027?
Yeah, well, maybe. The short answer is, it's tight cost management. When you look at, for example, our headcount base, it is only growing because of the acquisition. Organically, our headcount has come down. That's the first thing. The second thing is when it comes to general sales and admin expenses, we manage that very tightly, and we started that at the beginning of the year, and we continue to do so. Therefore, you see the impact in the second quarter, you see the impact in the third quarter, and most likely you'll also see an impact in the fourth quarter. We've continued to manage the cost base very tightly there. In terms of how you should think about it going forward, obviously, we are currently in the process of planning our financial budget for 2027. We will continue to focus on productivity.
The key KPI that we use for this is EBT in percent of the gross profit that we are generating, and that also has improved year-over-year in the third quarter, as you can see in the financial highlights. Therefore, it will be one of the key levers to drive productivity going forward, and we also expect to make progress in 2027. I would expect a similar level or even better performance there.
All right. Sounds good. Thank you very much.
You're welcome.
The next participant with a raised hand is Andreas Wolf. Andreas Wolf, you should be able to unmute yourself and ask your question. Mr. Wolf, please.
Morning. Congratulations on the results. I hope you can hear me well.
Yeah, we can hear you.
Great. I have a question on Q4 and the EBT floor. The guidance that you updated needs a Q4 EBIT of only EUR 123 million, I think, and that is just a minor increase year-on-year. What would need to happen for you to reach only the lower end of the guidance? You alluded to an encouraging October. Maybe you could shed some light on what you are seeing in the fourth quarter. Then, obviously, there was a negative read-across from Intel with its Q3 results. Intel guided for a 12% decline in 2026 PC units and a fall of more than 20% in H2 units. Maybe you could also share what you are seeing with regard to PCs and the general client behavior and the impacts on your business. I guess this question is probably also linked to the previous one.
And then on 2030, as it is approaching quickly, we are already approaching 2027.
Yeah.
Maybe you could also shed some light on what you see with regard to managed services, the pipeline for next year, as it is obviously one of the levers to achieve a higher margin for Bechtle. Could you also talk about measures that you are implementing in regions below your profitability benchmark? Thank you.
Okay. Maybe let me take the first one, and I will take the last one. Konstantin will talk about your second question. In terms of Q4, we had a long debate about what kind of guidance we want to put out and what kind of upgrade we want to put out, and we came down to a number where we said it is going to be more than 10%. I think the major driver of our performance in Q4 is going to be the conversion rate of the current order backlog. You see, we did improve that one further in the third quarter. We are now at EUR 3.6 billion. It is a record level, never been that high before. Therefore, it is going to come down to the question, how much of that can we convert in the fourth quarter?
That is going to drive where we are going to be north of 10%. I think that is going to be the main thing. We know the deals that are in the pipeline for the fourth quarter. We know what to expect in terms of cost measures for the fourth quarter. Therefore, this is going to be the major factor driving it.
On the hardware side and unit growth, as mentioned before, customers reallocated their budgets because of the price spikes. We have seen a decline in units around the workplace, covered up on the revenue side by increased pricing because predominantly by the memory pricing. We strongly believe that there are two trends that will help that unit growth next year. One is that customers will need to start investing again, replacing older units. We believe that now the budgets are reallocating inside the customers, that we will see some growth driven by that replacing. The other trend that we are seeing is that with increasing AI loads in the companies, a lot of customers are building their AI loads as well as at the edge, which means at the workplace. We see even trends to multiple PCs, multiple units for users, team units to run agents, et cetera.
The workplaces will get bigger, more costly, and there needs to be replacement. I think those trends should drive unit growth next year at the workplace. On the other hand, we do not foresee a drop in unit growth in the data center because customers are investing in cloud, in hybrid cloud, but also in on-prem data centers and investments also driven by sovereignty and data sovereignty, et cetera. We believe that the shifting of budgets this year will create some reallocations of budgets next year, where we think there should be seen some unit growth. The only thing that could counteract that to a certain extent is if we see more layoffs in other industries that we are serving, that could, of course, drive down certain amounts of replacements. That would be now a glass ball to predict into that.
Thank you. The managed services pipeline?
Yeah. Managed services overall are developing well. Also with our acquisitions, we are increasingly investing in those environments. We are also putting a lot of effort into increasing automation there to make it very efficient. Overall, you saw the case like in the Bavarian judiciary we showed earlier. We have a lot of managed services around cloud business. In our strong partnerships, like with Microsoft, we invest a lot of making sure our customers are not just putting their workloads in the cloud, but that we are really helping them to put the right services around them and manage workplace services, et cetera. We see a continued growth in the managed services space.
Thank you.
In terms of your general question around 2030, how are we going to get there? Maybe just a quick summary here. We shared it at the Capital Markets Day. It is going to be a combination of growth and mix in terms of products and growth expansion, a combination of productivity initiatives that we're driving, and M&A as well. We're expecting major contribution from growth and mix, in particular, building out the services business that we just talked about. In terms of productivity, we have three key levers that we talked about earlier today. It's around process harmonization, it's around the go-to-market model, and it's around the IT investments that we're making, IT and AI. These are the key levers that we are currently planning out for the year 2030.
Based on the first models that we see and the first discussions that we're having, we're confident that we're going to get to our 5% EBT margin target by 2030.
Thank you.
You are welcome.
Mr. Joe George is on the telephone line, and you can unmute yourself, Mr. George, and ask your question.
Hi, guys. Can you hear me okay?
We can hear you.
Perfect. Thank you very much for taking my question. I just had a follow-up for the previous questions on price and volume considerations. I guess, how prepared is the business for a period of potentially rapid deflation? Just thinking about if and when we see additional capacity come online in some memory markets, how would you expect your customers to react to significant deflation in quite a short time period? And what would the business response from Bechtle look like in that situation? Thank you.
Thanks for the question. Honestly, I find it difficult to answer because everything we hear from all our vendor partners, from the suppliers of memory, there is no sign whatsoever that there could be a deflation. I mean, there would have to be probably a big bubble burst, if there is a bubble at all, to make that happen. You have seen this year, we're the other way around, where we were all challenged at the beginning of the year with the memory crisis coming into place and with the price spikes that we were very, very well prepared to put teams together to react to that situation. Just in general, I would say we would also be prepared for the other way around and manage it in a similar, precise, organized way. Nevertheless, I see this as a more theoretical risk right now.
Understood. Thank you.
Okay. Thank you very much. We move on to our, therefore, last participant with a raised hand, Mr. Chris Tong. Mr. Tong, you should be able to unmute yourself via your telephone line. Mr. Tong, we still can't hear you. It seems that this is not possible for Mr. Tong to unmute. There are no more questions in the queue, and therefore, we come to the end of today's earnings call. Thank you very much for your showing interest in Bechtle. With that said, I'll once again turn the floor over to you, Mr. Ebert.
Thank you very much. Ladies and gentlemen, again, thank you very much for your interest in today's call, for your good, valuable questions, and your interest in Bechtle overall. We really appreciated you joining us today, and we look forward to our next interactions. Thank you very much, and I hope to talk to you soon. Thank you.