Hello, everyone, and a warm welcome to the European IT Services Summit. So I'm pleased to have you all here to this session, and it's dedicated to the CANCOM SE, and I'm delighted to welcome Vice President, IR, and Corporate Strategy, Lars Dannenberg. So Lars will share some insights with us shortly and guide us through the presentation. So, Lars, I would say we are interested, so I hand over to you.
Yeah. Great. Thanks, Sarah, for that. I'm having here the presentation, the corporate presentation with you to discuss current topics. I will guide you first through the presentation, as a lot of participants which are online haven't met me before. I'm heading the IR department and corporate strategy, as mentioned from Sarah. I was on the sales side for almost two decades and changed sides a few years ago. So what do we have? CANCOM is one of the leading digital service provider in Germany and in the DACH region. The company was founded in the early nineties and went public in 1999, and since then was constantly growing as an IT service provider, IT service house in the German area or in Germany only.
We were the first Apple reseller in the DACH region in very early days, and as the market is highly fragmented in Germany, we were always active in M&A transactions and took over more than 40 companies in history and so far. Also thanks to the growth we had and the external growth that came through acquisitions, we grew constantly and were quickly among the top 10 service provider in Germany. Currently, we are number 6, number 5, depends on which metrics you're looking at in the German market for IT service provider. We did...
Well, here, we just highlighted the biggest transactions we had successfully done over the time, which was in 2019, a service, a managed service provider we bought, and the biggest bolt-on jump we had in M&A transaction was in 2023, when we acquired number two in the Austrian market, the K-Businesscom business, which is now known as CANCOM Austria, and they contribute now 30, a bit more than 30% to our revenues and also to our EBITDA. With that, we are leading in the DACH region. Our focus is the DACH region, which differentiates us from other larger market players that are active in whole Europe.
We had activities in the U.K., for example, which was sold, that was, yeah, a strategic move from our side to really focus on the DACH market in Germany, which has a size of EUR 150 billion per year, roughly, and it has 100,000 participants, which is hence a very fragmented market. So the tail is extremely long when you go below 100 or 50 million in revenues, and that's why we think the market is large enough to keep growing in this area. Here you can see basically what our core fields of business and the activities we have. So on the first side, we have hardware and software trading.
So if you need a Microsoft license, if you just want an iPhone out of the box, an iPad, a Samsung phone, a laptop or monitor, you give our sales force a ring or they call you, and that's the pure trading business. So this is hardware and software trading. And then, going from there, we have the service business, which starts with the consulting and the professional service, and then the service is more and more enriching. So our customers is the German SME or the German-speaking SME space, and we have 43,000 customers in DACH region. We focus on the Mittelstand here, and for them, we are a bit like the outsourced IT department.
So if they have any questions, if they want to grow, if they need their landscape to be changed, their set up, we are the first point of contact with them and fulfill the whole criteria here, depending on the requirements the customer have. So we can start from call center service, or we can plug in the laptops or the new monitors or video systems. But on the other hand, with the managed service, which brings, of course, the highest margin, and we can also provide you, yeah, we can manage your data. You just give us your data. We have them in German data centers. We have across Germany, so they are not abroad, they are not in the U.S. So this is a unique selling point.
Basically, we have the data are served, managed, and guided here in Germany, and this is a business where, of course, you have, like, the highest margin in business. When we talk about our customer space, this is the portfolio we serve it in, so it's like this slide we have put it to the horizontal and broken it up. So on the right side, you can see the different industries we serve. We have no, as we have 43,000 SME customers, we have no bulk in here and there. We really serve the Mittelstand. Only public is a core customer group we have, which represents 30% of our revenues.
In public, you again need to split it between federal public, which is one-third of the public bucket, so 10% of total revenues, and the other two-thirds equals 20% of total revenues that goes to local public. Federal public is the government in Germany and the ministry in Berlin, and the local public business is like communities, schools, universities, everything that's in the communities and local in the, in the own states. That's then in the local business. Apart from that, the financial industry, so asset management, Frankfurt, for example, banks in Frankfurt, they have, in percentage, the bill of material is a bit higher, with IT needs with these guys, but also they are not representing more than 5% of our revenues in total.
The services I just showed you on the slide before, they are here in the middle. They're here. On the left side here, you can see basically our portfolio again with core focus topics we have identified, which we think should provide the strongest growth potentials. Of course, it's AI and digital solutions for the customers. That comes along with Internet of Things. Workplace is the systems. I'm sitting here in front of meeting rooms, for example, data center and cloud. If you don't have a proper data center, where you have your data stored and visible for AI, there cannot be any analytics done if the data are not sorted and structured. It goes along with security and connectivity, a field where our acquired Austrian friends are very, very good in and active in.
Of course, you need to secure your data. We talk about sovereignty in these spaces. These are one of the strongest growth markets we see, and that's nicely covered by our Austrian colleagues, and the portfolio is what we can use in Germany as well, of course. Enterprise applications, a cooperation we have with ServiceNow, where we have a development platform where we customize and size, basically, the ServiceNow portfolio to make it suitable for the German SME space. This was in a development phase in 2025. Cost quite a lot of investments here to customize, that will go into sales now to the SME space from 2026 onwards.
This is a chart I just wanted to show you, which is client roadshows we did in 2025, to show you the interaction we have, because all of you know that it was the customer were reluctant in ordering new equipment in 2025. They were sitting on the budgets and there were high uncertainties with tariffs from the U.S., how is the German economy growing? Yes and no. So a lot of them were just keeping the money together. And this is an example for customer roadshows we did in 8 different locations here, which came along with a lot of IT hardware partners we have. We have, for example, one of just a few NVIDIA partners in Germany.
Of course, with IBM, Microsoft, Dell, HP and Cisco there, we are the highest platinum partners, which allows us to... We get involved very early in new products and in the development and customization. So we are also allowed to act in the back end and on the core of these, their solutions, which is unique when you look at the long tail you have in the German SME space here, as serving the IT market, where the customer companies can just resell what they get basically from these guys. And in these roadshows, it was really one of the core topics where all the time were AI. What is AI? How can it help me? What do I need to invest?
What do I need if I want to get AI in my production lines? End-to-end . So there were a lot of topic discussions on this, and that's there was a high demand, and that is now constantly, slowly turning into orders with the customers. But it shows you the interaction the sales force, for example, had with the customer space. As we will present Q4 figures next week, Thursday, on the pre-level, I cannot talk really about the Q4 numbers, so unfortunately, I have hence the Q3 numbers with me. And you see that it was yeah, challenging nine months we had, with slight decline in revenues and the disproportionate hit in the EBITDA.
And it was mainly the German segment, where we had also restructuring measures that was severely hit, while on the Austrian side or international side, it's a compromise for Austria, and maybe 5% of this business, 7% of this business is public business in Belgium, in Brussels, which is sitting with the European Union. So you see, security is a topic that is driving, and that's here helping the revenues and the EBITDA of nine months to continue to grow. When we then just dive deeper into Q3, you see that overall, what we had in downturn in the first half was stabilizing on demand side with the Q3 numbers.
Due to restructuring measures we had, the EBITDA was short compared to the year before, and here again, mainly driven by EUR 4 million restructuring we had in Germany. Apart from that, we would have been flat, and that's the picture the international business is showing for the third quarter. And that was like after the half year, Q3 was giving an uptick in revenue stabilization there and also on EBITDA levels. Also worth to look at cash flow patterns, because it's very cash flow driven business we have. We had EUR 55 million net cash after nine months, which shows you just the normal pattern we had in previous years, traditionally as well.
If you look at that, our CFO mentioned also in the Q3 call that there, we are aiming for 100+ million operational cash flow in the fourth quarter, which would bring us then again, back to normal patterns on, on that side. Also a topic worth to mention when we talk about the cash flow, is also our cash spending on the share buyback program, which we had the approval from the AGM in June, and we started this in September. It's a 10% buyback, maximum EUR 90 million. I think we will not need the EUR 90 million. Last Monday was, the last announcement, and we had bought back 1.1 million shares for EUR 30 million at an average of 26, roughly, and that represents 3.7%.
We are currently running this program with full maximum speed, which is allowed, and that's helping to provide a certain base for the share price in our view. This is a topic, of course, for next week when we bring the pre-numbers. We are aiming in the middle for EUR 172 million in revenues, and in the mid-point, EUR 105 million in EBITDA. However, the board mentioned already in the Q&A session of the Q3 call that we are rather looking at the lower end of the corridor, so midpoint to lower point of the guidance. And with that, I would say we have our 20 minutes done on time. We're more than happy to take your questions.
Thank you so much, Lars. So, ladies and gentlemen, we're now happy to take your questions, if you may have. So you can speak directly to Lars by raise of your virtual hand, or you can pose your questions in our Q&A function, then I would read them out for you. And we directly received a question. It's a bit longer. Do you see a recent catch-up in the German public business due to an end of budget restrictions, or is this business still more or less on hold?
Yeah.
Can you give a little bit of color regarding the time of the picking? Q4 2025 or Q1 2026, or even later in the second half of 2024?
Yeah. Yeah. Thanks, Mr. Klapdor. So, on that question, I have to make it a bit longer. The thing is, as public represents 20% and local business represents another 10%, giving 30% of total revenues, the public market is generally driven Q4, and year-driven budget business, and it's even worse. It's really December business, where the orders come in and the money is spent. Why is it? Because public business is, for IT, it's a budget-driven business, and it's cash flow driven. So at the end of the year, on the first of January of the year, the budget starts with zero, and they have the next year's budget. So they can't save on the previous year budget and then prolong it to the next year or something like that.
That's not possible. Now, if you look into the last two years, we had, we had the problem that in, in Q4, I think it was November, December and 2024, Mr. Scholz was asking the big question in the Bundestag, so Misstrauensvotum, and with that day, business totally collapsed because nobody knew on the public side what will happen. Then it moved into 2025, and in 2025 it was a situation that there was no budget approved until the nineteenth of September. So what does it mean? If you are sitting in the public ministry and your Samsung phone, iPhone is falling off the table and is broken, of course, you are allowed to replace it, but you can't do big project investments on the IT side because the budget is not signed in yet.
That means only 30-40% of the existing budget is allowed to be withdrawn for replacement investments. So if the Ministry of Labor, for example, thinks about replacing all fax devices and make it digital, which is a six-month project, then this was not possible before the 19th of September 2025, and if you are on that date, you're already late of the year. Framing your demand, framing the framework contract for that, takes you another two months. Then you send it out, the RFP, and then IT companies like us are pitching for this deal. And this goes in several rounds by the versa, and takes another three months.
So we talk about, like, from the moment the budget was signed and was granted from the government, you at least need at least four months to have it up and running to have larger projects. So from the beginning, it was clear in 2025 that in Q4, there were no big new contracts coming in, not for us and not for our competitors. Hence, Q4 is a business that was driven by existing framework contracts and by the calls for these existing contracts and framework contracts. So, for example, if you hold a contract for, I don't know, 100 million iPhones, and we were the counterpart, these could be fulfilled, but that's it. Yeah.
Having that in mind, Q4 is a traditional business for public, but without new big projects, and they will also not come in Q1, right? Because now there's a new budget starting. 2025 was a lost year on that. Q1 starts. Luckily, we have a new budget since December, and that starts now, ramping up over the year. And as I mentioned, 46 months for an RFP to win it. The public business is quarterly ramping up, with showing the biggest impact traditionally in Q4 of every year. A bit longer, but I think the context was required. Thank you.
All right. Thank you for answering. We have another question on: What will drive your business in 2026 regarding Windows 10 to Windows 11 or DigitalPakt 2.0 ?
Yeah. Thanks, Sarah, for that. That's a good question, and that was also the business we expect for 2026 and was also important for us to level the, to manage the level of salespeople we have, because we kicked 200 people out. And where to find the balance if you have this nice opportunities in front of us, and it's really that if you look out into the DACH region, IT equipment is extremely outdated. It was replaced. It came new after with Corona, with the COVID times in 2020, 2021. So a laptop is now 4-5 years old, and my laptops are not looking good, but they are 5 years old. So it's definitely a wave that's going there.
There needs to be replacement to be done in 2026, for this. A driver that is pushing on that hardware replacement on top is Windows 10, Windows 11 replacement. There are, out of 11.6 million devices in Germany, only, 2 million, 2.5 million devices have been replaced. So Germany is sitting on 9 million devices which are not able for Windows 11, and that means that if this old Windows 10 environment is still operated, then they are not secure. There are currently Windows patches. They will run out in October, and from there, the computers are not safe anymore. And every CEO of a mid-cap company is liable, and so no insurance will pay your cyber hacks if you are running an outdated system.
So that is even coming on top of this replacement wave we expect. Then it's the federal budget is a topic I just mentioned with Mr. Klapdor. The budgets are approved in December for 2026. We are back to the traditional rhythm and pattern. So having that in mind, we expect a really really running, yeah, typical business on public on that front. Also, I think on Friday, the government came out and the European Union with their figures for the BIP growth, GDP growth in Germany, which is also a topic that's definitely helping on our side. So that's improving on that.
On that end, we have a DigitalPakt 2.0 , it's called, that's positively, positively impacting the, local business because it's the iPad and, and yeah, a device replacement, special budget of EUR 5 billion for schools and university. That's running very well. So, overall, if we sum this up, it's, 2026 is in light of an improving economic environment for the German Mittelstand, in our view, boosted or supported by outdated devices, not Windows 11 capable. On the public side, we have a budget, and we have the DigitalPakt 2.0 . That's, definitely on the positive side. I can see that Simon is asking a question, which is just adding up on that, if we see any risk on, 2026 on chip shortage. So that is something that is-...
impacting the market this year, but we see it in a positive way. So the fact is that in late November, December, the RAM producers, there are just three worldwide, Samsung, Micron, and SK Hynix. They experience a high demand of RAM chips for AI data center, and because of that, it could happen into a shortage. So where we were going is, like, we are securing volumes, we are supplying, securing delivery, and we informed our customers early enough. And our CEO was last year also with our biggest suppliers, and they again secured us the delivery of the items we need. On the other hand, of course, it means that the offers we have out are just out for two weeks now with price fixes and not for two months.
And then we need to ask for new prices. We see customers that are now acting early and going into, "Hey, let's replace everything of our hardware in the first quarter and not split over the year." We have the volume secured, so we will get everybody served, just the prices might increase for our customers, which is good for us at that point.
Thank you, Lars. So I think you covered all the questions in the Q&A.
There is a follow-up of Mr. Klapdor, I can see.
Oh, follow-up. Yeah, that's what we can ask. So, is there a difference in the recovery respecting your public hardware business on the one hand, and your public software services business on the other hand?
No, because it comes along... If there's no money to spend, it doesn't matter if it's for a Microsoft license or if it's a new iPhone. If you don't have the money you can spend, you can't buy it. And for 2026, there are several... It's just starting normal, right? They are coming in RFPs. We are pitching for the RFPs. And these are traditionally projects that come along over our entire value chain. So it's not just, we are not just selling here a license or we're selling there a laptop. It's normally coming with an entire project that contains software and hardware.
All right, great. And then another question: Can you give some insights about the risk side and possible pressures from AI regarding your consulting professional-
Yeah.
-services business?
Yeah. So on that side, AI is handling us on two sides. So first of all, we are selling AI solutions from our partners to our customers, to make them more efficient, more productive. And on the other hand, it of course also is impacting us in a positive way, because we have like, we are using AI, of course, also internally, to get more productive and faster, and maybe here and there, save some headcounts. And the area that is mainly asked here for is, like, our call center business, for example. And here, it's the fact that we are operating call center for our customers.
And since the mid of last year, I think September, we are more and more implementing AI solutions with our call centers for our customers to get more and more automated outputs on that side. So I forgot my password, what's the login on this page again? I was on holidays, I can't find the holiday formula, where to find it. So that's more and more replaced with our AI solutions, and we think that over the time, we can shift the staff to different tasks than just answering these easy questions AI can do. We, of course, also sell our own AI solution there, which is the CANCOM Assistant. Yeah, that's an existing AI that's coming from our partners and has a CANCOM branded front end.
If you buy this, for example, some communities did, we brand them in their page, and you can see it. If you go on the web page of the communities, you can ask them what's the opening hours of the car station, and what are waiting hours, and then they give you the answers already. That's something we sell. Yes.
Great. Thank you so much. So in view of the time, we will come to an end. So thank you, Lars, for your presentation and for answering the questions. And dear participants, thank you for your interesting questions. So if you have some follow-ups, just get in touch with Lars. So, yeah, from my side, thank you and have a lovely remaining day. So, Lars, final remarks belongs to you.
Yeah. Thanks, everybody, for your time. I think it will be an interesting 2026 for IT and for the German Mittelstand, and we are just happy to be among the top players in this market, and we really want to ride this wave here this year. Thank you very much.