Ladies and gentlemen, welcome to our Q&A session regarding our results. My name is Jan Pahl. I am Head of Investor Relations, or your moderator today. I am with Ronald here, our CEO.
Yes, hi.
Hi. We are happy to receive your questions. Hope you have all checked out our latest results, and maybe had also the chance to check out our translation from the webcast, from the German-speaking webcast into the English version. It is on YouTube, actually. It is free, and you can check out regular. Now we are waiting for the first questions. Please also note that this webcast will be recorded. You can type in your question, and bullet points are absolutely fine for us, so I think we can handle your question and can expect what you want to ask. I see that the first one is typing, and maybe we wait another second for the first question. However, please note, if maybe because of some data protection or whatever, you cannot use the chat functions, you can also send me an email directly.
I put my email address in the chat, so if maybe someone struggles because of data protection of his organization or her organization at least, please just fire an email to me and I can read this as well. We got the first question. It is coming from an investor from the U.K. Could you mention your view on how challenging it is to achieve our full year guidance, 26, on EBIT? Thanks.
Yeah. Okay. Let's say, we are at EUR 30 million at the end of Q3, and our guidance is EUR 40 million-EUR 55 million. To achieve it, we have to cross minimum EUR 40 million. Usually, we have a strong first and last quarter in a year. Q3 and Q2 are usually slightly weaker. Current average of this year is EUR 10 million. I would say, from a mathematical perspective and from a historical perspective, it looks all good to cross the EUR 40 million. The question is how far we cross it, and this depends a lot from the, let's say, market environment. We had quite an interest volatility over the last two months now, a sharp rise in interest rates in August and September, and you could say a similar drop in dynamics during October now. Let's say, this changes on a weekly basis, the dynamic.
Let's say, we should not see a constant declining interest rate environment during the last quarter. Would make this quarter more challenging, would be great for next year when we start with a low interest environment. But this is, for now, difficult to predict, where the interest rates are going forward. It is defined by global activities, let's call it, surprises, especially out of Washington, which it triggers these changes here right now. So, let's say, from my perspective, all fine with our guidance by now. Yeah. And let's say the fact that the interest rates are down 0.4% now already, again, from their peak end of September, is great for the affordability of home ownership here in Germany. So in general, yeah, I am fine with short-term declining interest rates as well.
Thanks. There is a follow-up question from the same investor. Could you explain what did you do operationally speaking to bridge the Value AG, our property valuation service, business back to break-even? So we achieved break-even, so what was the reason there? And what is the target going forward?
Let's say, so what was Oh, no. Am I still
I hear you.
Yeah, you hear me well. Okay. Because again
We hear you, we see you. It's all good.
Just a second. Just sometimes the microphone wants to switch to the iPhone. This is triggering some disturbance here. Okay. What was done a lot in the last two years in Value AG to achieve this? In the core, the high loss resulted out of massive changes in the market environment and regulation, and the mismatch of our resources and our processes to the current environment, let's call it. There was a lot of work that had to be done to align our organization from resources and from a flow of information and the processes to the current market environment. You can say it's a productivity gain, but let's say triggered by sharp changes in the environment, and to adjust to this, and to be more flexible in the end as well.
Second was, we were able to increase the prices thanks to a higher quality that we achieved with our services. We launched new products, especially in the corporate banking sector, with significant success. We improved efficiency along the value chain by digitalizing certain major processes in the different products. It is a lot of nitty-gritty detail work in the end that was done, leading to less people managing more valuations, more appraisals. This efficiency gain is now at the level that we are positive break-even, a small black number there. Going forward, the same process is going to be continued, because it is a constant flow. It is not a one-trick pony or something. It is a constant process of optimizing the organization for optimizing the product, optimizing the price portfolio, integrating with the platform, and having a competitive advantage to similar services run by competitors.
Saying this, we expect Value AG to grow in top line with a quite stable cost base in the near-time future. I hope this describes well where we are there right now.
I hope so as well. If not, however, feel free to catch up and fire the next question. We got another one, which is back on the guidance. A follow-up on this. I agree that with the Q3 results, the guidance, especially the lower end, seems feasible. However, Financing Platforms is still guided to a high single-digit gross profit growth for the full year. But the nine-month results is only up by 2%. How much rest on REM Capital seasonal strong Q4, and what is the pipeline here?
Let us say it is a lot about seasonality of REM Capital business. As well, housing associations have this, depending from interest development, and then a strong Q4. How is the visibility? Always tricky. We work the whole year, bring projects up to the point that they are able to be, let us say, financed and subsidies to be granted, and fight up until the last day of the December to get it done this year, because often budget closes at the end of the year, or corporates may change their perspective next year. The typical year-end nervousness is there. I can say from my perspective, like I experienced this with REM Capital for the last years, and I would say it always worked out, but it never felt so uncertain like this year.
But as always, when you're in the middle of this period, it's like this in the beginning of January, we know how it ended.
Right. Thanks. There's another one from another investor. Should we expect to see the big refinancing wave to appear in 2027 in your P&L, or may it will be postponed to 2028?
We expect in 2027 that the 2012, 15 years mortgages are due for refinancing, and that we see a significant jump in the refinancing volume on the Europace platform. Right now, we have EUR 1 billion in refinancing per quarter on the platform. Usually, we had EUR 2 billion-EUR 3 billion before this interest rate environment change. And since then, let's say, our market is in a similar size when we account our market share growth. We expect to recover this to this volume and to make a significant step for this improvement during 2027 already, yes.
Great. Okay. And I hope this answers the questions. However, if not, once again, feel free to catch up here in the chat or via email. At the moment, I see no more questions. However, I see that a lot of investors are dialed in into this chat. So, feel free to type your questions.
We had a very active German Q&A session four hours ago, or three hours ago.
Yes, that's correct. Everyone can check out this as well. However, I think we can wait another moment. Yes, there's the next question coming in. From an investor as well, c an you give us an update on your capital allocation, also going into 2027? Given the cash generation, what is your thinking on share buybacks?
Yeah, let's say for now, we see that our cash flow is improving, and we expect as well a positive dynamic for next year. We stay focused on optimizing our current, let's say, business models and structures, adjusting them. Let's say, bringing the profitability up. As you know, we want to double our EBITDA margin from 2025 to 2029. This said, we don't expect to explore new areas and allocate resources there. Not organically, and as well not via M&A for now. This said, the next good thing that you can do is buy your own shares, especially if you have the feeling that the strength of the business models in our three segments are not valued equally in the share price, something we see right now.
If the share price stays where it is, we will allocate cash flow there to improve the ratio for the long-term shareholders here.
Right. Thanks. Bundle of questions coming in. I try to group this a little bit. The next one also from a little bit higher level. Could you explain the building blocks of the target of doubling EBITDA margin from 2025 to 2029? I think it is a little bit wrong. It is not our EBITDA margins, or EBIT on gross profit margin, which we want to double from 2025 to 2029. This is the question. So what are the building blocks here?
Let us say, similar to this what we execute this year. First of all, the 2025 EBITDA margin was still diluted by business models which were early stage, still loss-making, like Value AG or Corify in Insurance, or WOWIPORT in the Financing Platforms segment. All three contributing negative EBIT, so diluting the EBIT margin, are on the path to contribute EBIT and improve EBIT margin, and all three have the potential to lift our EBIT margin, even when you look on an average then. These are business models which should not contribute negative. This is one part. Second part is, as well in all three segments, we have business models which are already in the phase of, let us say, scaling. The incremental gain with growth coming from the market or by market share gain, it provide high EBIT margins, incremental EBIT margins.
In all three segments, we see that this is a significant improvement is still possible there because of the, let us say, position we have in the market, and as well that from a perspective of developing profitability, we are still on an early stage. So, second block. Third block, I would say, on the midterm perspective, a general efficiency gain across the whole group. Something where AI is playing a role, but as well as strict cost management coming out of a period where we were growing for a long time, and where we now are much more focused on which product, let us say, which process is contributing to a significant positive EBIT margin, what is not paid well by our clients.
Let us say, what to change as well in the way how we do our business, what we leave behind in this to come to a better ratio, in the end, a better cost-income ratio. This is something ongoing now for, you can say, the last years, starting to focus in this year with AI as an accelerator, and something that will be with us until 2029 and farther. We are still in a pretty early stage when you look on profitability. Long time we were focused on top-line growth. Now the focus shifted, and we deliver results there and plan to do this in the next four years as well.
Great. Thanks. The next questions are related to Europace. I will start with one in direction of the regional banks. Any questions on Finmas, on Genopace? Any news on the rollout of Europace in the saving and cooperative banks? I think saving banks recently offered the rollout of Europace. Any news on this? Is there a good conversion rate here?
Yeah, let's say, the current growth that we show in Q3 as well, or if you look in nine months, 13% in the savings banks industry, is linked to an organic rollout of our services within the group. For a long time, we were working on a project to integrate better in the infrastructure of our joint venture partner, under the name EVOS2. The core is that a bank in the future, if this central switch decides to go open architecture and use Europace for their business, is able to compare and broker third-party mortgages, or not. This switch is there now. It was rolled out in September. Unfortunately, they are still in the testing phase of new functionality because there are still some bugs that need to be fixed with our joint venture partner.
We hope that in upcoming weeks this is finished and we can be really productive on this. For next year, we expect a positive dynamic in sign-up of full savings banks, which up until now just used it on an application basis. The advisor had to decide based on single applications if he wants to use open architecture, or if he wants to stay in the traditional environment. In the future, this is a central switch for each saving bank, and this may accelerate our growth in this sector. We are waiting for the fixing of the bugs for now. Cooperative banking industry, it's as well an organic track. Latest product bundle which we launched was bringing Value AG's automated valuation model to the cooperative banking sector.
200 cooperative banks by now signed up for this, and we are in the process of rolling this out as a better solution to underwrite mortgages. In general, a dynamic environment with a positive sentiment for us right now. Be aware that, let's say, both groups, thanks to the market environment, lost volume this year, so that we are growing there in this environment shows that in both groups, the products of Europace are here very welcome.
Great. The next question is also regarding Europace, but now we are on the private bank side. The question is, t he retreat of the Deutsche Bank remains a headwind, both directly and indirectly directed to the name of Starpool. How much more is there still to go? How would you describe Deutsche Bank's strategy on the market now? Is it still retreating or stabilizing? On the indirect channel, is there a point where maybe Starpool becomes no longer relevant?
Let's say it's difficult to comment on strategic decisions of single partners. In general, what I can say is, you see this when you sum up the numbers, private banks reduce their volume, and we have a massive exposure to one large client here. This client, on a quarterly basis right now, is celebrating in their own reporting the reduction of their mortgage portfolio, tells you a lot about their current dynamic. I would say from this, what I understand is that the sentiment there is shifting already on the sales side of all private banks. We feel that they want to underwrite more mortgages already again, but between wanting to do this and achieving this goal is still a way to go. But I'm sure that all private banks will recover in the German market, because their decline recently is pretty untypical and was linked to equity costs.
There's some relief coming starting on 1st of January 2027 from a regulator side. The mortgage portfolio gets more attention again, and I'm sure they will soon want to come back and increase and not decline the mortgage portfolio.
Right. Thanks for this. Hope this answers the question. If not, once again, please come back. Questions, we got one last from a pretty high level on AI. What effect do you expect from consumer agents like the one from Meta on your business model in midterm?
Yeah. Consumers using AI or agent to pre-qualify during the mortgage application process is something expected from us for the last years now. We see slowly that there's an impact in the quality of leads that we generate across all social media, all search, and as well generative LLM platforms. But still, it's still, let's say, minor what comes through this channel, but we expect this to change this in the next decade to a significant portion. This kind of leads are easier to convert because the consumers are better prepared. So it's from an advisor perspective, so a Dr. Klein franchisee, for instance, it's a very attractive lead, this kind of consumers, not someone who just had the idea to find out if a mortgage could be something for him or her and is not very qualified in this idea.
In general, great for the improvement. To be the partner of choice, the advisor of choice, it's important that you are present in these agents. For this, we built a technological basis. Dr. Klein is actually via an MCP service available already for these agents. We make sure that, I would say, thanks to the 25 years of great feedback about the quality of the Dr. Klein advice everywhere in the German internet, that the LLMs as well know that Dr. Klein is the perfect solution for everyone who's looking for an attractive mortgage product and with a good rate, a good process, and an independent advice. We see that for now, we profit from all this, and hope that this dynamic accelerates, so that especially Dr. Klein, as well other independent advisors which are doing a good job, profit from this.
They all using Europace. Europace provides the necessary data through the process for the consumer in their agent already, and then later in the interaction with the advisor on a technical level. Not a lot to do for the advisors. Just use Europace and you will be successful in this new environment.
Right. I've checked out that there are no more new questions. However, we can wait a couple of seconds if maybe someone would type in some last questions. I've not received any via email, any additional. I don't see anyone typing again, so last chance. If not, I would like to thank you to you, Ronald, for your answers. For all you investors, stay safe, have a good holiday season, and we will see latest in March again with our preliminary results on the fiscal year 2026 and the outlook with 2027. Right.
See you then. Bye-bye.
Thanks. Bye.