Good afternoon, everybody, and welcome to our quarterly call today. With me is Andreas, our CEO.
Hello.
Good to have you all with us. We have communicated our Q1 figures this morning at 7:30 A.M. CET. The press release can be found on the website. Andreas will now present you the business update and the figures of the first quarter. This will be followed by a Q&A session. So go ahead, Andreas. Thank you.
Thank you. So welcome also from my side. I hope you have a good afternoon when we come now to the English call. And as always, we would like to start with a short introduction of DATAGROUP for those of you who are not too familiar, but only one slide, and many probably already know us quite well. And then we go to the details, how the first quarter has started, and the figures which are the results of the first quarter. Yes, DATAGROUP, we are the leading German IT full-service provider. And why do we see us in this positioning? Because we are the only company, at least in the German market, who is really positioning as focused on IT service. And that means, what are we doing for our customers? We are running the complete IT for them.
To do this, we are using what we call our CORBOX service portfolio, corporate IT services out of the box. That was the naming for the CORBOX, which is now in the market for more than 10 years. We just launched the seventh generation, the latest generation of the CORBOX, because we are always renewing and innovating the services within the CORBOX to be able to represent everything what's needed to run a basic IT for a mid-sized enterprise or mid-sized organization. You see here on the right side, we are doing it for cloud services, SAP, and we are ending with service desk and workplace services. Everything a typical enterprise or organization needs. We are doing this purely made in Germany. Our 3,500 people are mostly located in Germany.
And we do this with EUR 530 million in the last fiscal year. And most of these revenues are CORBOX revenues. So either the service itself or additional changes, projects, and other services around CORBOX customers. Because in our opinion, with the stickiness of CORBOX, what means using CORBOX services, you usually don't want to change service providers. Means we have a very long-term relationship to our customers, to our CORBOX customers. At the moment, we have approximately nearly 300 CORBOX customers. And as long as you have this customer relationship, you can talk about everything else the customer needs in IT purposes. So very good chance for up and cross-selling. So even if the customer starts only with one CORBOX service, at the end, our target is always that he's purchasing more and more of the CORBOX.
And also, of course, for additional solution projects, we also in a certain portion are offering. And like I said, to do so, we are always innovating the CORBOX. The ones who are following us already for a longer time know our core investments of the last fiscal year, investments in AI, cybersecurity, multi-cloud, which are now also part of the latest generation of the CORBOX, the seventh generation. I come to this later on a little bit. And that's the way how we are working.
The good news is also when we show in the highlights of the Q1, we see that this is a very stable business, which is even in a challenging environment as we have it in Europe and Germany at the moment, is running quite well because IT basic service every company, every organization needs, no matter how the economy is running at the moment. So it's quite differently handled compared to investments, to projects. You certainly can postpone for a certain time. The service is different. It has to run IT services. It sets what's daily needed within the organization to keep their business and their processes running. And when we come to the highlights of Q1, we are happy to announce that we see a very good growth compared to the Q1 of 2023, 25%, a growth of 15% with an organic part of 8%.
In my opinion, growth at the moment in this environment is a very good and important message to evaluate a stable and a very good performing business model. When we go into details, we will see it's not pure CORBOX growth. We also have some special effects which are coming up following the international accounting standards. But I will come later to this. When we are following our good development in the last two years, further growing the organic growth portion of our development, the important point is that we in the one year are working on the sales, on the order entry of the business, what is coming to revenues in the following one or two years. That's important because there's a transition period in between.
When we are looking at the moment in Q1 on our sales pipeline, we are seeing the revenues which will be part of our business in 2025, 2026. It's very important for us to have a good view in the future to see now how sales are doing. As long as they are running well and they are doing so at the moment, we can be sure that also the business is then following in the next quarters and the next fiscal year. Up to now, we have reached 18.7 annual contract value of additional business, means new customers, but also cross and upselling, what means selling additional CORBOX services to existing CORBOX customers, but also a good number of new customers who at the first time started to purchase a CORBOX service.
These EUR 18.7 million ACV in additional business will pay out probably in the next fiscal year. They will bring us another growth. And so compared to the revenue we have at the moment, we see the results of our sales process of the last year. They are coming into production now. So with the EUR 18.7 million, we are ensuring our future in the upcoming fiscal year. But not only the organic growth is part of our growth story, it's also still a smaller but still important inorganic part. And we are happy to announce that we acquired in the last Q1 TARADOR. It's a small and medium enterprise service provider.
You might remember we started with Hövermann, continued with CONPLUS, two companies also in this SME segment where we are working on an approach comparable to the CORBOX approach for the enterprise level companies, also to address this in the small and medium-sized company areas, IT as a product, IT service as a product also for this area. And there, TARADOR is the next step into this direction. Last highlight I want to mention is a further ramp-up of our automation rates. You might remember it's part of our investments in last we started last year really focusing on automating our production processes by using AI and other technologies. And I will show some more figures on this. And there also, we are happy about the development of our automation rates, which makes us very confident that also profitability will develop into the right direction.
And also these activities will give us the background for a further price-aggressive growth path in the organic area. So when we look on these numbers again, you see here the two growth pillars, cross and upselling with EUR 7.1 million, EUR 11.6 million in new customers area. That means our actual targets of EUR 10 million-EUR 15 million in each area. We are already on a good way after the first quarter in the view that we will over fulfill these targets for the full year. Of course, it's also important not only sell new business, also to maintain the installed base, the existing business. That means the prolongation, the extension of contracts. Up to now, we managed 30 contracts to extend for another contract period with an average contract period of maybe four years.
We always say each year we want to do the extension of maybe 20% because some contracts are also renewing automatically. So 20 per year. With overall something between 250 and 300 CORBOX customers, 30 are already a good number for the first quarter. TARADOR, I already mentioned, we have one of our target level of two to four acquisitions per year. We will see if there will be another one following this year. We are, of course, also working on new acquisitions continuously. If we go a bit into detail, we see something else. What's important to know that we have a very good widespread customer portfolio also in the new order intakes. They are coming from industries like printing, specialized machinery. If you look in these industries like these two, they have especially in the European area at the moment quite a challenging environment.
They are still bringing new service contracts to the markets. Why are they doing this? Because giving IT services to professional service providers like DATAGROUP is a measure for them to optimize their structure, to make them more flexible in this challenging environment. That is good news for us. Even in this environment, we have a good order entry as we find new customers who say, "I give these services to a new or as a first-time to a provider overall to flexibilize my own cost structure." Other industries like chemistry, service logistics, trade, insurance, and energy sector are doing these steps. You see the annual contract value we are showing here is quite various. It's between EUR 500,000. The biggest one is the one with EUR 2.9 million for workplace services for a quite big player in the energy sector.
It's also a good spread of smaller companies where the average monthly revenue slice is somewhere around EUR 50,000. Bigger companies where you have a much higher level, even if you're delivering only a single CORBOX service. The situation for all of them is they all nearly have potential for cross and upselling. If we start, for example, with workplace services in this energy sector company, of course, our next step is now to offer additional CORBOX services to upsell into this customer. The important point is that when we are working on this, we are, as I already explained, we are working on our future. Because in IT services, entering or signing a new contract means you have to wait another 6 to 12, on average, we are talking about 9 months until these contracts come into revenue.
We've started to show this slide, always updated. You see here we have just reached the point that we have, on a monthly basis, that's important, the new order entries of the last fiscal year to get into revenues. That means the rest of the years we have them, but still they are partially missing in the first year. It always takes one full year until you really have the full year effect of a new customer. That's important to know that we are always talking about effects which we see in the future. For us, it's normal. We are working on the revenues of the upcoming years in our sales process already now. For us, it's always important to have a full pipeline of CORBOX deals to ensure also our growth in next and the following year.
Just as a glance view on TARADOR to give you an idea, it's a company with EUR 8 million in revenues, 15 employees, so quite a small company in this small and medium enterprise segment. They have a special focus on cybersecurity. Very interesting because also in these segments, customers are learning that investing in cybersecurity is quite important, especially smaller customers, maybe with employee numbers between 50 and 500 employees, have the challenge that they get more and more attacks in the cyber area, and they have to also start measures against it, things they were not forced to in the past, and that means very good business for TARADOR. They are significantly growing in the last months.
And like we mentioned here, they are adding together with Hövermann IT Group and CONPLUS our SME segment where the plan is to build something like a small CORBOX business for smaller companies. So we are happy to have them within the group. And the other focus is still working on our innovations, on our focus areas, AI, cybersecurity, and cloud. And they also brought the new features of the seventh generation of CORBOX, the Gen 7, how we call it internally in a short way. And I will show a little bit on this later on. Out of a financial perspective, we are reaching now slowly the area that we see these paybacks. Even if the Q1 numbers, when we go into details, we don't see the bottom line effects clearly already.
We see it within our P&Ls of the companies which are using these technologies and working with them. So the good message is after one year where they had a certain impact on our results, our ambition now is to come back with a profitability level to former days as we are not stopping to invest, but we are having the result from the first significant paybacks from these areas. And for one area where we can quite very good prove this is the AI investment. You see here the trend. And the ones following us already for some times know it from former periods. And I'm very happy that we've reached over 30,000 automated tasks now in January. And you see it's growing each month. In February, we are expecting something like nearly 50,000 tasks. So our optimization train is really running fast now.
We have several DATAGROUP organizations who have significant teams who are working every day in training sessions, in teaching sessions, training the new capabilities to our core intelligence, how we call it now, into our technology to further automate things with that, and we'll go into production within the next months and increase the number of automated tasks here. At the moment, with these numbers, we reach already a significant area of automated tasks in our pure DATAGROUP production processes. We are somewhere around, depending how you size the scope of the addressable workload, somewhere around 20% of the addressable workload, but we have an even bigger area as soon as we would include also customer-centric systems to address with our automation technology.
And we are talking with the first customers about this step that they allow us also to use the technology in the systems we are administrating for them. And as soon as we get to this area, we will get access to another addressable workload volume of tasks. So the message is it's really a long-term project. And I'm expecting that we will work another two years on further automation of additional things. There are still a big backlog of things we can address. And that's, of course, a good message that there's enough potential still to address. And of course, the question is, do you already see these effects in your numbers? And I have to admit, there are some small hints, but you still have to search for them. And we are looking on these effects very much in detail. But the first small things are visible.
Let's start in the top line of our revenues now. We have reached in Q1 significant growth of EUR 139 million in revenues. That's 50% more compared to Q1, 2023, 2024. This growth is including also a significant growth in services and maintenance, growth by 6.8%, but also means a big portion of the growth is coming from another area. That's also the reason why we have some special effects on the next levels, including the cash flow later on and so on. Because part of this growth is also the effect which is following the IFRS standards when we bring out new hardware included in CORBOX services for new customers which are in the ramp-up period at the moment or in the transition period. This hardware is shown as a one-off effect. It's in that form important to understand that we are buying hardware.
We are delivering to the customers, rolling out on each workplace, and they will be paid in the next months within the service fee, but IFRS is showing it the way that you are showing a one-off revenue because they say it's the same way as if the customer would buy it, and so we see revenues, but without cash flow here. That's important to understand when you look later on in the cash flow statement, so the pure service growth would not be as strong as we see it here, but we are still happy with it as we are also growing in the services and further growth will follow up by new customers going into production within Q2, Q3. As you have heard, we had good order entries last years, and they are going into production now step by step.
So we are very confident also without these special effects of trade volume you see here having a good growth also in the upcoming quarters. What's also part of this special effect is that we have following these transitions, and it's a matter of how costs are allocated in each quarter, that we see a certain pressure on EBITDA, EBITDA, and EBITDA level. So even with a higher revenue, it's a small decrease compared to last fiscal year. The reason for this is that the costs included into the transition we are calculating in a defensive way and showing them in each quarter as an effort because sometimes transitions are more challenging than planned. But it's also an effect, I expect, which we'll leverage again in the upcoming quarters. We are, like I said, a bit defensive in showing these numbers which are focused on the Q1 scope.
The increase in personnel costs is due to the acquisitions, but if you compare the personnel costs to the gross profit, you see the overall gross profit is, in a small way, increasing stronger than the personnel costs that are, in our opinion, and we see it more clearly when we look into our production units, that we see first effects of our optimization, so we bring out more gross profit with comparable less personnel expenses, even if we are still investing in capacities doing this automation job at the moment. When we look in the balance sheet, you see an increase of goodwill driven by the TARADOR acquisition. Also, that following some bigger purchases, we reduced our liability by 27.3%, and we still have a quite stable net EBITDA of 1.79, and some of these effects become more clear if we now look on the cash flow.
We have a negative cash flow in Q1. Why is this the case? Because on the one hand, the effects are just mentioned. Bringing all these hardware into service means you have to pay this fleet of new devices, so negative for the cash flow and the payment will come from the customer in the upcoming 48-60 months so always, and there are still effects which are not coming every quarter. These big rollouts are still a quite stochastic event for us. In these quarters, our cash flow is quite burdened by these effects. We have some additional effects like higher tax payments following some effects out of former acquisitions and their earn-out phase and we have also made very hard negotiations for the upcoming three years concerning license costs. You might have heard about the activities, Broadcom has acquired VMware and increased prices very much.
We agreed on a long-term contract with them with very good prices, but this one long-term payment included a one-off payment upfront. That's also a special effect which we see in Q1. That brought us to this negative cash flow, but nothing we are concerned about as we see these effects quite clearly in this quarterly slice we have here. From an investing cash flow perspective, it was quite a normal quarter. We have a normal level of additional CapEx invested. Of course, the outflow for TARADOR is also included in this quarter, but it's comparable to Q1 of the last fiscal year. From a financing perspective, we increased our financial liabilities of about EUR 16 million to finance the activities I just mentioned. The additional cash needed for the hardware rollouts, for the tax payments, and also the purchasing of license packages.
So overall, quite a special quarter if you look on the cash flow. But as I said, we are not concerned about it as we see clearly the effects, and we know that they are only limited to this quarter, and we will come back to normal cash flow again in the upcoming quarters. Let me close our short presentation with a look on what we've done from an innovative perspective and where our investments of last fiscal year ended in our product innovation cycle. I would like to give a short overview about the latest CORBOX generations, Gen 7, how we call it internally, and the four new features: Core Intelligence, Core Security, and Core Compliance, Core Cloud that are new service elements which connect all nine service families.
And our idea is that having these elements in the core, so every service includes AI in the production of itself. Every service is strongly secured by core security, including the connection to additional explicit security services. Every service, you can choose on which cloud you want it to be based on. So a real multi-cloud approach. And that's new. It was not part of the three topics last year, but we worked also continuously. We created a compliance service. So following all these regulations in certain industries, you can now outsource the compliance readiness to DATAGROUP. So what does it mean? We are delivering the proofs for compliance requirements directly with our service. So the customer doesn't do this anymore on their own, sending auditors to our service productions, checking the compliance of our service.
We are directly delivering this proof, this compliance reporting included and directly connected to our services, and that's really especially for these 30,000 KRITIS and NIS2-related companies which have to fulfill these requirements in the near future. For them, it's very good news because coming to DATAGROUP means I can directly connect to the compliance-ready CORBOX and have no issue in fulfilling these things on my own, reading all the compliance regulations on my own instead of working with our compliance experts and consuming the compliance-ready CORBOX services, so that's the idea of the latest CORBOX generation.
Using these capabilities, I'm quite confident that also in the upcoming Q2, Q3, our order entries will continue on a good level that at the end, overall, we reach also this year a good order entry which then will enable us to continue our growth also in 2025/ 2026, 2026/ 2027 as they still have to be boarded after signing. The full effect will be then seen in these years. A very stable long-term business model we are explaining here and giving you an insight how it is running and hopefully convincing you about the attractiveness of DATAGROUP at that stage. That's what I brought to you up to today. I think we can continue with the questions, Anke.
Yes. Thank you, Andreas.
So before we open the floor for the questions, may we ask you to explain the short explanation of the procedure of the Q&A session?
Thank you so much. So if you would like to speak directly to Mr. Baresel, you just do this by raising up your virtual hand. So if you've dialed in via phone, you can use the key combination star key 9 to enter the queue, followed by pressing star key 6 to unmute yourself. And if you're not able to speak freely today, you can also submit your questions in our chat box. So having said this, Mrs. Banaschewski, I hand back to you.
Yeah, so the floor is now open for your questions. No questions in the line so far, so I'll give you some more time. There's one question from Ms. Amelie Dückelmann. Please go ahead.
Hi. Can you hear me?
Yes.
Amazing. So this is Amelie Dückelmann from Berenberg. I have three questions, if I may. The first two on the transition startup costs you mentioned. Could you give some examples kind of on what these costs are that DATAGROUP incurs related to the implementation of new customer orders? And kind of following on from that, what gives you confidence that these costs will not recur later in the year? And can you give us a sense of what you consider a normal margin level?
For sure. Maybe some examples for especially bigger transitions. And you might remember our major order entries of last year. There were quite significant order entries with EUR 3 million, EUR 4 million, EUR 5 million annual contract volumes. And these transitions typically have a volume of at least the nine-month period of the full contract. So maybe transition volumes of EUR 2 million, EUR 2.5 million, EUR 3 million. And they are running for several months, sometimes even more than a year. And of course, during the transition, you have to decide how many costs you accept each quarter and how many costs you allocate really to this transition contract and how many costs you don't connect or you don't address there. You just leave the cost as it is. And we are, that's what I mentioned, quite defensive to be sure that we manage to work with the transition budget during all these periods.
And in some of these bigger transitions, we are at the moment in kind of the middle of it. And so we are a bit defensive how much costs we allocate. And we accept to have a lower level of EBITDA margin at the moment to be really sure to end up with a good in time and budget transition at the end instead of now bringing more costs than maybe planned to the transition and having no rest budget at the end. And then the bad end is coming. So being a bit more defensive in the first quarter means accepting that in the back end, in the following maybe two quarters, these transitions will be successful. And of course, we are always looking that the transition is ending before the end of the year.
So, you have kind of in the Q3, Q4 of the effect, transitions are closed. We see everything's fine. We are in budget. And then these effects are leveraging again. Of course, the other point is that sometimes we are working on better platform situations which to put the transition on, maybe some innovations in tooling. And we accept some additional costs for this tooling to use it directly in this new customer situation. And of course, not a single customer has the payment of this new tooling, this new platform capabilities, whatever. So we decide to accept during this transition some additional costs which were not directly calculated, which are pushing or bringing a bit of a pressure on the results, but where we know at the end we can run the customer maybe even more profitable than we planned to do.
And so it's a well-known situation that during the onboarding of bigger customers, the efficiency of the costs is not as good as in the period. And as we are really growing fast at the moment, we have some more of these effects. And that's bringing, or maybe an example, how to explain these effects. And that's also the reason what is giving me the confidence that we'll become better. Because we know as soon as a customer is boarded, services are in production and up and running, you don't have these costs anymore because they are one-off costs. And then the service is running. You're getting the revenues for the service payment and having an optimized cost structure already brought into this customer situations by the effects I just explained. And that will come as soon as the transition ends and the service is starting.
That gives the confidence that these are effects which we see maybe now in Q2, but which will leverage at latest maybe in Q3 when some of these transitions have been brought to an end to a successful end. Yeah.
Thank you. Very clear. My final question would be on the lower trade payables, kind of burdening cash flow in Q1. Why did you need to pay suppliers faster than before in the quarter? Could you clarify?
It was a bit of a bundling of purchasing volumes. So we decided to bundle the purchasing and to switch it over to October and November instead of buying a part of it still in September or July, part of these licenses. We were pushing and pushing to the end of the year. And you might know the effect. The closer you come to the end of the fiscal year of the supplier, the better the conditions get. So by doing this bundling, but then also to agree to do the payment directly, we have kind of bundled the effect. And you pay then in one bunch the license costs, for example, for the next three years in total. And for example, in the area of VMware licenses, we bought the capacity which we know we will need for the next three years.
But we have to pay them now and upfront and not comparable to the past. We managed it more the way we bought a yearly volume and another volume and so on. But we saw directly maybe the reason is that Broadcom is another player behind. They have another idea of giving discounts. And that was one of the reasons for this big, I think it was a EUR 6 million portion only, which usually would have divided in EUR 2 million slices, which hit us in this Q1. And it was combined with some other effects like the hardware investments. That is another EUR 6 million effect with hardware we brought out in two different customer situations. And you can calculate. If you calculate EUR 1,500 per workplace, that's a typical quantity today. That are just 4,000 workplaces. These EUR 6 million is one bigger and one smaller customers.
And that's also an effect we have. And I don't like these effects really in the way IFRS is showing it. Because in a typical way, how the normal bookkeeping would show it means you are investing. You have a depreciation over the years. And you are not seeing it in your operational cash flow. But that's the way IFRS is working here. You have the full effect in the operational workflow. And even if you are doing a sale and lease back for this hardware, the payback of the money you are having in the financing cash flow. So it's always spread. And that's making this a little bit special.
Thank you very much.
Thank you. So there's one more question from Lukas Spang. Please go ahead, Mr. Spang.
Yes. Hi, good afternoon. I have one question regarding your transformation revenues you will build down over the years. Can we expect a rather similar proportion over the quarters this fiscal year? Or is there some disproportionate share over the quarters?
We were expecting, and it seems to run a little bit different. We were expecting this year something like EUR 18 million in our former planning, but it seems the hit would have come in the third and the fourth quarter. So end of March, it was planned that one customer would leave, a bigger customer. But at the moment, we see the effect that this is not happening. The customer will stay a bit longer as the transition is not going as fast as possible. So probably he will leave after the end of the fiscal year. That means that we were expecting a bigger portion in the second half, but that's changing at the moment, and if this is changing, we will have some effects in the second half, but there are already effects in this half.
So you're probably right that we have the same level of effects during the year, maybe a bit more in Q3 and Q4 than in Q1 and Q2, but not as much as we formally calculated.
Okay. Thanks.
So at the moment, I cannot see any further questions. In case there are further questions, please give us a sign. Let's give it some more time. No further questions. So thank you very much for attending. It was good to have you all here with us.
Thank you.
So see you next time at one of the next occasions. Thank you. Bye-bye.
Thanks. Bye-bye.