Ladies and gentlemen, we warmly welcome you to the Q3 earnings call 2026 of IVU Traffic Technologies AG. I am pleased to welcome the company CEO, Martin Müller-Elschner, and CFO, Petra Meiser, who will guide you through the presentation. After, we will switch over to the Q&A session via chat box today. Please understand that we will not be accepting any questions via audio track today. Please note that we will enable the Q&A chat after the presentation, and it will only be visible in your toolbar at that time. With that, I am handing over to you, Martin.
T hanks a lot. A warm welcome to everybody. We are always delighted to have so much interest in our company, so welcome at IVU Traffic Technologies. What Petra and I have in mind is to guide you a little bit through our company. We have a two-step presentation. I will start with a business overview about some recent developments, and Petra will continue with the figures, with the nine-month figures, but also with the outlook, where is our company standing. I hope that at the end of the day, you will have a very accurate picture about our company, what we are doing, but also what we intend to do in the near future. I would like to start to take you a little bit into our world, and our world is a world of public transport.
The name Traffic Technologies already says it is about traffic, it is about transportation, but IVU has even a deeper focus. We developed through the last 50 years nowadays into an expert for public transport software. Public transport, I think, is really known to everybody, but maybe not everybody is aware about the details, about what is happening behind the scenes. You think, "Okay, I go to the next bus stop, and there is a bus coming, and I enter, and that is it." But please keep in mind what has to be done before this bus has arrived in time at that bus stop. There needs a vehicle which is well-maintained, which is well, maybe charged. There is a driver which has to have some rest for the last days.
He has maybe some special education to be done before he is able to allow to run this bus or this train. There is a lot of details, like a puzzle, must be put together to have a public transport system running, even if you think about it in a larger scale. That is what we illustrate with our IVU.city. It shows a little bit that we are dealing with all modes of public transport, so it is mainly buses and trains, but any type of trains, streetcars, midi buses, ferry boats, long-distance, high-speed trains. Everything which is done in public transport is a target for our software suite, that we can help public transport operators to be accurate, to be efficient, to be also safe in what they are doing.
That is our target, and that is why we claim for ourselves that we are the digital backbone of a modern public transport. Transport operators all over the world appreciate what we are doing. The IVU.suite is the core of our delivery. It is a software suite which allows to put, like Lego bricks together, different parts of our solution to adapt it to the special needs, but everything fits together, has an integrated data flow. That is why I think we are on a good track to have a standardized software system which also allows to care about all details, about regional specializations, etc. That is, I think, what we are aiming at, and we are doing that for more than 50 years already.
To give you an overview about how our business is running right now, it is always difficult because maybe we are not the most neutral ones to say, "Okay, perfect, yes, we got it." We had, I think, an interesting quarter. The third quarter of the year is very dense, and it is also dense because we have some customer events. The biggest one is happening every second year in Berlin. It is the InnoTrans. It is the world's leading trade show for transportation in total, I would say, for public transportation of any kind. There is a hall which cares about software companies, and we are just in the middle of that hall. We are surrounded by other suppliers, but also we are getting visitors from all over the world, and we get a very immediate direct feedback from the customers.
Let us just say, I was really pleased to have this spirit, this positive energy. Really high-level premium customers are visiting us, this high-level premium C-level guest also, and they want to work with us. They want to also partner with us, I would say. I think it gives a very special energy, and I hope, I think, we can rely on that feedback that we are well on track concerning the customer side. This year, I am doing that for some time, and I was really excited about the new products we could show there, because as a standard software supplier, it always might also be a little bit boring and very standard, very basic. No, it was really the underlying layer, well-maintained, but also having very attractive new products, new features based on that integrated software suite, on this integrated data flow.
There were AI-driven add-ons. There were new technical developments, more going into modern technologies, web-based, cloud-prepared. A lot of really attractive showcases. We have it shown to many customers. We showed it also to existing customers. Talking a bit about what is special at IVU, I think we have a really strong relation to our customers, to our base, because if you are a customer, you don't come and buy something and it is a one-timer, but you stay, you become part of a user family, ideally. To illustrate these type of customers and these types of relationships a little bit, I just picked the three press releases we had within this third quarter to illustrate a little bit what we are doing, how we are doing it, and what does it bring to the customer.
We are starting quite close. It's BVG in Berlin, and you say, " BVG in Berlin, it's an IVU customer for 45 years maybe. It was one of the first customers." Yeah, but it's a changing customer. In the very beginning, it was some more consulting and urban planning work done for BVG by IVU. Then there was a special software developed especially for BVG in the, let's say, 1990s. T hen switching them to the standard product of the IVU.suite in the early 2000, I think finished in 2010. It shows that there's a long-lasting relationship which also delivers new project, which also asks for new features. Here's one example which has really happened during the last 5-10 years.
Electric buses coming into the towns, and they are coming, they started slowly, and that was more on the research level, but now they are present, they are omnipresent, and they need a special infrastructure. What we can deliver here is a depot management system, which is much more than just a charging system. It's an integrated solution. How do buses, and we see it's a lot of buses, hundreds of buses, how can we charge them properly that they have enough load for the next day? How can we deal with the maintenance interaction, but also how can we care about that the timetables are covered by these buses?
This is, I think, shows a good example of a new feature inside this new topic, but also embedded into an overall IVU.suite, because it's not separated from here is a timetable, here is a maintenance, but it's integrated as a whole workflow of a public transport operator, and they appreciate that we are doing that. Although they are a longtime customer, they're also a new customer, for example, for these modules. It shows a bit about customer, also about developing new software products for the new needs of the societies. I switch a little bit more international. We go to Greece. Hellenic Train. I don't know who has used them.
I would say not the largest network in the world, but also it's, I think here we see one of the newest trains, so it's not the most modern network of the world, but it's a state railway, and it's in a country where there's a lot of public transport demand to be expected in the future. For us, it was attractive to be there very early, to be there with a train, a first customer, and this could also be a basis for more customers in classic public transport inside the country. This is also one of our, to illustrate one of our strategies, enter new markets with our, I would say, most USP product, IVU.rail, but also then expand the customer base later on. Here it's another special story. Maybe you noticed below Hellenic Train, as shown, Ferrovie dello Stato Italiane Group.
This is the strategy of FS Group in Italy, so maybe more known as Trenitalia, which is the passenger transport operator in Italy. They have on their roadmap, they want to expand over Italy, let's see where, but in the Mediterranean, they went to France, they invested in Spain, they went to Great Britain, but also have other plans. What they have in their, let's say, their backpack, they are taking us with them. Growing internationally by partners is one of the most attractive ways to grow, but you wouldn't do that if you don't feel IVU as a partner. If it's just a supplier, maybe a supplier with sometimes misbehavior, you wouldn't do that. That's why we really care about our customer relationships, to have them as a long-term partnership, ideally. Here, something really exciting to see what happens in Greece.
We had earlier a project with the tram in Athens during the Olympic Games, also at this time promoted by BVG in Berlin. Good to remember that. I think they are investing. They have metro system. I've been there in Thessaloniki. Interestingly, Thessaloniki metro system, you know who operates the Thessaloniki metro system? It's the metro from Milan, from Milano. I think these international connections are ideal for us. We have a third and also very special example, a customer which is not yet running trains. What we see here is the illustration of the trains they ordered, and they want to have within the next 12 months approximately. What they are preparing for is to have a high-speed offering for France, for the Paris-Atlantic coast connections on a very high level.
We see very modern trains, t hey are double-decker trains because otherwise you can't afford the prices for the track usage. They want to make a difference. It's more like, I would say, airline-style interior. a very interesting development there. A lso that they, in preparing the operation, which will start in mid of, or sometimes in 2028, they were looking for also how to start a business. If you do so, I think you want to rely on some experienced partners, software providers. Standard software is really appreciated. During the kickoff, I talked to the CEO, and she said, "Yes, it was not the cheapest offer which IVU made, but it was the most reliable partner." Because we have shown everywhere in the world, but also in France, that our software is working and that it's, yeah, working properly and that we got really good references from our customers.
They made their choice and say, "Okay, I want to be on the safe side. I want to have a reliable partner. Also, I have so many issues to start this railway operation from scratch. Yeah, we want to be with you." What we also committed is, "Okay, we start slowly," with, I would say a smaller license fee, which will grow together with the partner. They have ordered, I think, now 12 train sets or something. They will be successful. We will be also successful. Maybe to mention, everything is out of the cloud. We talk a lot about how is our technical setup in the future, and also this will lead to the question about how is our income structure of the future.
Here, it was really easy to say, okay, nobody They were on site, but nobody had to go to Paris because we just could switch it on in our IVU.cloud, and they don't have to care about any IT issue at all. That's what was really appreciated. I think we can underline that IVU in general is well-positioned in the customer side. We have winning new customers. We are not losing customers. Just to illustrate that, I always like the picture of the IVU railway customers, and it shows that it doesn't stop. It's growing and growing and always very interesting, also new perspectives. Just in what happened this year, maybe some of you know FlixTrain, which is a private train operator in Germany, which is starting to have more trains and more high-level trains also.
We have some existing customers extending their licenses, but also FGC. It sounds nice because this is the second or third railway customer in Spain. It's the regional transportation around Barcelona, so in Catalonia. I think it's running, and I don't see why it should stop. I have to change the slide next year to give some room for the new customers. Only one technical detail about our technical issues. What is attractive for us, if there are European or national European standards, and here is one of them, and maybe you also noticed that the interaction between railway operators and the network providers, which is DB Netz or DB InfraGO in Germany, but also in every European country, is on a new standard. It takes some time. I t was formerly known as TAF/TSI standard. Now it's called TEL TSI standard.
It's an interchange format how you as a transport operator apply for train passes on the track network and how you get the feedback and how do you change those and how also it's calculated and booked. You maybe have noticed that if Italo, for example, an Italian railway company, comes to Germany, they have to deal with these issues as well. Being there as one of the first implementers, very close to the network operators, gives us also a technical advantage and also, yeah, room for add-on licenses to be sold to all customers. I already emphasized the importance of recurring revenues.
I think what we have shown over the last, yeah, nearly 15, no, yeah, 15 years is that we grew in total, but I think we also grew inside the structure of our revenues because they grow in total, but also the classic maintenance and support grew. We have a good perspective to have everything, what we call the IVU.cloud or the hosting and operational management, to grow also in the near future. Okay, I'm always talking too much about that, but I think it gives a good impression, and it will come to that point later on. I think I mentioned already that we have a 50 years anniversary, which was celebrated.
Just to give you an overview, I think we took the opportunity to, yeah, not only to party, but also to bring people together, IVU employees, but also customers, also during the annual shareholder meeting together with the shareholders. I think it was a good sign to ourselves, but also to the market. We are there, and we intend to stay there. It differentiates us from startups or other, I would say, tendencies which are more short-term. We are a long-term supplier for this niche market, and they appreciate that. That's what I can feedback on that. Just as a summary, what should you keep in mind when thinking about the business development, the business feelings about IVU? I think we have an increasing customer base, but it's not only the number, the pure number of customers, but also the quality of the customers.
We have the most high-level, most well-known customers, which always give a good reference also for further customers, which will also give for customers which are maybe far away from Germany, they have no experience with us, but if they say, " SBB in Switzerland is working with IVU, I know if the Swiss guys, which is a really top-notch railway company in the world, they are doing so, I might not be completely wrong." Then we have the customers which grow, which take us with them, etc. I would also like to praise the quality of our customer base, not only the pure number, but also, I think, impressing. There's room for international growth with partners, but also directly, and I think everywhere in the world where railways are running, we could contribute, but also we have to care about how to do it properly.
That's something which we are working on. We have good product developments, steadily increasing product, but also we have good potential for more cloud business. Why is a customer switching to the cloud? It's not that this industry is a first mover concerning modern software as a service offerings, because usually they had their own IT departments and they did it somehow. I think everything what surrounds us gives more pressure that you need really high, reliable software availability 24/7, that you need good performance, but also you need a high safety. You're completely under attack. These are all KRITIS customers, they are attacked, and they want to be really safe concerning cybersecurity. This helps to extend our offering to a full-service offering, which will hopefully also increase further the recurring revenue. That's also something which I have illustrated. AI helps us everywhere.
As I think in former meetings already explained, we have the classic AI usage in our administration for the IVU AG business. That's, I think, started already two years ago, and agents working in different internal services. A lso, we started to have the software development supported with AI, and there was a big move this year, and I think we were one of the first movers to implement it also into our software development departments, and we are happy about that. What was shown on the InnoTrans was really interesting to have first AI inside products where we could offer AI tools to our customers. They appreciated that, and one which is shown here, a very nice picture of the IVU.scout.
It is somebody, a chatbot, but he guides us through the IVU software, and you can really ask deep questions and deep analysis, which he can do for you. I think it brings us also now a lot of new perspectives at the moment, not to be so much threatened by somebody else using it or customers doing it on their own. We have always an eye on that, but at the moment, we deliver the basis, and AI tools are working above it. To summarize these two approaches, we call it internally the <neo>. It is a, let us say, more architectural framework where we want to develop our software towards, and also where we develop new software exactly starting now.
It is very good for, I would say, the customer side, because the user experience is one of the features, but also on the other side, we have the technical approach that we have safe, web-based, cloud-native, well to maintain and operate software, and it already pays off, and also about efficiency contributions, Petra will talk a little bit later. Summarizing all that, what are you doing today? You have a, let us say, a summary, and then you put it into the AI and ask, okay, we feel that we could claim for us we are a mission-critical niche provider, so mission-critical niche provider in markets with high barriers to entry. Maybe we see the wall or the moat around us. Giving that into Langdock, this was the outcome. I think there are some really nice details inside.
Like, I don't know, it is a German abbreviation, KRITIS, it is critical infrastructure, but also we need all these certificates. Switching software is, I think, not easy, and you would not do that if you don't have to. Like the ERP system, when you have a SAP in use, you would not switch from it to a new one. I think that is what we could show until now. That is what we intend to also work on it for the future. What I think is also good for IVU Traffic Technologies AG as a stock-listed company, that we want to bring this package of good business, but also good figures to the public, also to the international public.
That is why Petra is, I think, the best choice to professionalize our financial management, and also, like today, strengthen our presence in the capital markets. I think there is a lot you have already experienced, but also a lot what you intend to do, and I am happy to hear about that. Sorry for being always so long, but I cannot do it otherwise. Please, Petra.
Thank you so much, Martin. I try to be very fast so that we have enough time to also take some questions. Thank you all for joining us today. For those of you who don't know me, I am Petra Meiser. I joined IVU as CFO beginning of this year. Today is actually also the first time that we host an interim earnings call. We are opening up our reporting cycle to you more frequently from now on. Let us start now with the bottom line, talking about our first nine months. We have seen a very positive development, and our revenue grew almost 10%, and our earnings grew significantly faster than revenue. We confirmed the full-year outlook we raised in July. Growth in the third quarter was softer than in the first half, and I will address this directly. Let us go through these numbers.
If you look at our revenue in the first nine months, you see that it reached EUR 111.5 million. That is an up of 9.6% year-on-year. In the third quarter alone, revenue was EUR 39.5 million, so up 4.5%. The main reason for this softer Q3 growth compared to the first half is actually the timing of our recurring revenue. This is also when we talk about quarter-on-quarter comparison, we now have to start seeing this all in the light of how our business is changing with growing recurring revenue. It spreads more evenly the revenue across the year, and that is even more than it did in 2025. Our first quarter, and especially also the second quarter, were very strong, also because of the constant growth of recurring revenue. That, of course, shifts part of the growth into the first half.
Therefore, if you look purely now on quarter-by-quarter comparison with the year ago, you may see this effect, and please be reminded, it is really because of a growing recurring revenue that shifts our revenue into the first half. Our business is on the right track, and we have confirmed our full-year revenue target of more than EUR 160 million. Let us have a look a little bit about this mix I just mentioned. The mix is shifting in a positive direction, and positive is especially to see how our recurring revenue, which for us is hosting plus maintenance and support, accounts now already for more than half of our total revenue in the first nine months of 2026. Both hosting and maintenance and support increased their share compared with last year. Why does this matter for us?
R ecurring revenue is not only more predictable, it does spread our revenue across the year, so it eases our so-called, what we have seen traditionally in this business, seasonality. By the way, it gives us also a nice and stable earnings base. Looking at around half of our revenue as recurring by the end of this year, and roughly 30% of remaining revenue is covered by existing orders. Approximately two-thirds of our 2027 expected revenue can already be considered secure. However, we will provide guidance for 2027 only with the annual results in March 2027. We will talk about this at a later point in time. Let us talk about our profitability. Our focus on efficiency is showing clearly in the numbers, and I want to walk you through the details. Gross profit. Gross profit rose 10.5% to EUR 91.9 million in the first nine months.
That is faster than revenue. Our gross profit margin improved to 82.4% from 81.7%. In the third quarter, you see gross profit reaching EUR 32.7 million. That is an up of 3.5%. The quarterly margin was 82.9% compared with 83.7% a year ago. Here you see a reflection of a revenue mix, but you also see here this what I mentioned about when you now start comparing quarter- by- quarter, you see this effect that recurring revenue has shifted revenue into the first half. We also have to mention, if you want to compare Q3 with last year Q3, that in last year Q3, we had already received R&D subsidies, unlike this year. Let us talk about our EBIT rose. That has been more than 56% to EUR 10.2 million in the first nine months. Significantly outpacing our revenue growth.
Measured against gross profit, our EBIT margin reached 11.1%, up from 7.9%. In the third quarter, EBIT was EUR 6.9 million, and our EBIT margin on revenue reached 17.5%. Also here, you see the effect of our growing recurring revenue as the first nine months result also, again, has to be seen as it is. It is a cumulative result, so it includes the stronger half year in 2026, meaning the more even distribution of recurring revenue across the first two quarters that has supported our earnings. Since the second quarter, we see also the strong focus on efficiency is building up, and it shows now in the nine-month figures. In Q3, personnel expense rose only 9%. I think this also important to point out, and that it has fallen 9.2% from the second quarter.
These improvements underpin our full-year EBIT, and therefore outlook of around EUR 22 million will be confirmed, and that is what we raised in July. Let us also have a look what happens below EBIT. Our net result grew again even faster, and this year is because we see a slight shift from what happened last year. The consolidated net result rose 61.4% to EUR 7.2 million in the first nine months, and 27.9% to EUR 4.8 million in the third quarter. Here, the main driver is our financial result, and that is what I meant is, it moved from a small net expense last year to a small net income this year. Our income tax rate is more stable, and we also expect it will remain stable around 30%. Our balance sheet and cash flow.
We have a strong liquidity position, and as Martin also already mentioned several times, there is a lot of things we would like to do, a lot of things we have done, and this allows us to execute our strategy from a position of strength, and it gives us the flexibility to act quickly when attractive opportunities arise, for example. Our balance sheet remains solid. At the end of September, our equity ratio was 48.5%, compared with 45.5% at the end of the second quarter, and 43% at year-end 2025. The decline since year-end mainly reflects this year dividend payments, so including the special dividend as well, and of course, our share buybacks. This was partially offset by our net income, but you see it is still a very strong position we are having.
Our current assets cover our current liabilities 1.94x , and that is supported by a substantial cash position. We are acting really from a position of strength. In the first nine months, we invested EUR 5.4 million in treasury shares. We do expect, that has to be pointed out here for reading our annual report may be better, that we do expect to pay the tax liabilities of around EUR 9.3 million in the fourth quarter. The timing of this payment remains subject to the tax authorities, but we expect it will arrive in Q4. Let us have a look at our strong cash flow. Our operating cash flow was EUR 21.3 million in the first nine months.
Last year, we had EUR 16.97 million or EUR 17 million a year ago, so that is a plus of 25.3%, and it is driven by our EBIT of EUR 10.2 million and a positive change in net working capital, so the EUR 9.4 million. Our investing cash flow was broadly neutral. It is EUR 0.1 million, so with a capital expenditure of EUR 0.7 million and a slightly higher financial income. Our financing cash flow of EUR 16.8 million includes the dividend payments, so the regular ones, and the special dividend payments, and also our share buybacks of EUR 5.4 million, and other financing item representing mainly lease obligations. As a result, cash and cash equivalents rose from EUR 44.1 million at the start of the year to EUR 48.6 million at the end of September.
I think the key takeaway of this slide for you should be that our asset-light business model converts profit into cash, and we were able to also return in cash to our shareholders, as shown this year, but I think also shows the history of the company. Let me summarize a little bit what has happened, and I would like to start looking at our outlook and the guidance. Our business model is characterized by high visibility towards the end. This is also the reason, or let me say differently, so this you can see why we have a long track record of meeting our guidance. This gives us strong confidence to confirm our full-year 2026 guidance, meaning that revenue is more than EUR 160 million, gross profit around EUR 130 million, and the EBIT of around EUR 22 million.
Now summarizing a little bit all together from the first nine months, we see our strong business growth to continue with constant increasing portion of recurring revenue. The growth of recurring revenue and our efficiency focus lifted our earning results, and our financial position remains solid, and we confirm our full-year 2026 guidance. Let me close with the foundation of our equity story. As Martin already mentioned, IVU is a mission-critical niche provider in a market with high barriers to entry. Our systems run the daily operations of transport companies. Customers rely on us, and switching is costly and time-consuming. We have a consistent focus on profitability, which drives earnings growth and shareholder value. Our solid balance sheet gives us strategic flexibility, and so mentioned from my side, position of strength.
In the coming quarters, we will further illustrate two things: the organic growth of our two strong business areas in attractive markets, and our international expansion, which broadens our addressable customer base. There is more to come. As what is more to come and where can you find us, the next time we will talk in an interim earnings call will be next year, March 19th, with our full-year results.
We also plan to increase our activities, so we will meet very soon together, Martin and I, on the German Equity Forum with hopefully all of you. We will also be at HIT, the Hamburger Investorentage. We are planning to do roadshows, the days will come, and we are also planning to organize a Capital Markets Day. We are very much looking forward to meeting you not only in interim earnings calls, but also in person on several occasions. Housekeeping, I want to show the disclaimer, and then I think we can go into the Q&As, and I think I made some time, I hope. Okay, thank you very much. Let's go into the Q&A.
Thank you very much, Martin and Petra, for your presentation. Ladies and gentlemen, now it is your turn, and you are welcome to post your questions in our chat. The chat symbol is now open to use, and I am handing over to Petra for the very first question.
Okay, so let's do this. I will read it out loud. I got a question. "Your EBIT growth has significantly grown compared to revenue in the first nine months of 2026. What are the main drivers behind this improvement, and how sustainable do you consider the higher level of profitability?" Okay, so I think there are at least two questions in it. H ang on, now is the question gone? Okay, I see the question again. L et me answer it in the following way. Our EBIT development is driven by two main factors. T he one is the recurring revenue, which is increasing, and it also spreads our revenue more evenly across the year. T hat gives us a stronger first half, which, of course, you do see in the nine months, and it also gives us a more stable earning base.
It is, for us, a very positive development. The second one is that since the second quarter, we have had a clear focus on efficiency measures, which are keeping our cost growth well below gross profit growth. That is why our EBIT has grown considerably faster than revenue growth. Now I want to come to the sustainability. With regard to sustainability, we will remain focused on profitability and efficiency measures, to increase profitability also beyond 2026. That does not mean we will stop investing in important areas. We will further invest, for example, in areas such as cybersecurity, our new architecture, AI, or into our product quality, or in other things that is required. There, we will not stop anything. However, we will do this and improve our profitability to keep growing.
We will see, very soon, we will show our midterm outlook, and we are very confident in presenting then also how we see our profitability development in the midterm. T hat is soon to come. Okay, let me go to the next question. "As you indicate, international expansion is one of the pillars of your equity story. Where do you currently see the most attractive growth opportunity outside Germany, and what is the strategic rationale that you are following?" I think, Martin, that must be a question for you.
Yeah, I think I already had some indications what we are working on and what is exciting us. I think just summarizing it, we are, I think, in an attractive situation that we can pick a little bit where we want to go first and where we want to invest also our business development energy. I said we need markets which are somehow elaborated. At least you need a railway network to operate a railway. We are focusing on these areas of the world where we have a railway infrastructure, or I would say other public transport infrastructure on a decent level available.
That is, I think, helpful also because we want to invest our capacity, which is really well demanded at the moment, at the most promising regions of the world, and we don't want to spend time in difficult project which may be also having issues about the ways of doing business there. From the past, we had some experiences which led us to really check where we are going to. Yeah, Germany is still the largest market for us, and surprisingly, it always has developed the same way the other markets has developed. The growth was also driven by Germany in the same way. Yeah, Germany, German-speaking areas are important, will stay important. We have a strong customer base in the Netherlands. We have Italy, as, yeah, we call them home markets.
But also looking around in, I would say, well-developed European, Western European markets, there is still room to grow. I mentioned already, via Italy, going to Spain, for example, led us to be there and to grow there as well. Thinking about Spain, Spanish people, we have, I think, some connections also to look in the Spanish-speaking world market. Same for France. We are getting closer to France. We have a growing customer base there. T hat will be, I think, a lot to do. On the other side, we have perfect customers in Scandinavia, but they are so perfect, but they are not so many. W e have won more or less all of them, and having now a look at Norway, for example.
I think this shows a little bit first, the well-developed markets, and then preparing for the other ones where big of investment projects are going on in the world. L et's say Egypt, for example, is building up a new network of high-speed trains, and this is a prerequisite to have a need for our software because you need high-level, very costly resources, because we help them to use them properly. If resources are cheap, we can't contribute to that. I think this is the development in the world which helps us.
I think I mentioned the way, go there directly or use it via partners, and that's another approach which we are following, that we want to grow together with our partners in, yeah, coming from inside, not coming from outside into new regions. A lot of room to grow, and at the moment, it's more about us to choose what is the next step, what do we do in the next two years, and what we will do in the next five years. That's what we are exactly working on at the moment.
Okay. Let me ask another question. "You have indicated to step up your capital market activities. What specific initiatives are you planning to improve for investor access, transparency, and visibility of IVU in the capital markets?" I love that question because that's where we're actually going to meet, hopefully, more often. W e will take a number of concrete steps to improve our capital market communication. T he one is that we're introducing interim calls starting today, but we will also participate in more investor conferences, and we will conduct more roadshows in Germany, but also abroad. W e plan to host soon a Capital Markets Day. On transparency, let me also give you this hint. We're going to introduce segment reporting, meaning with the annual report 2026.
That means we will give you a much clearer view of our two businesses, rail and public transportation, and also the numbers behind them. That will give you a lot of much better understanding how our business is working and how to connect this with numbers. Besides this, we will also provide a midterm outlook, as I mentioned before, and with further explanation around it. I would also say, we are sharpening our equity story. I think you mentioned this. We are supporting broader research coverage, for example, as well. I think that's very important that we have also here more activities ongoing. I also want to mention that our investor relations website is currently being rebuilt, and we will use it to keep the markets informed.
I'm sure I missed something, but we will keep you posted, and we are very much looking forward to this. Okay. Talking about personnel growth, here we go. The question is, "What is your expectation regarding personnel cost growth in 2027?" Let's talk a little bit about personnel expenses. What have we done? When we talk about looking at efficiency measures and being an asset-light business, then of course, we also have to look at our personnel cost base and what can be done in this regard.
From the beginning of the year, then also especially in the second quarter, we have introduced what we would call a much stricter rehiring or new hiring policy, meaning we're really asking everybody to double-check whether this is in the light of AI and all the automation we have and all the things and process we have already in place, or in case of alternatives, is it really required? We are also asking much more, are these the right people we're hiring now? Because also as a software company, we do need to do a shift here because AI is coming, we're using it, and it does help us. We have also used a lot of more automation processes and digitalization, and of course, that is something you need to see in personnel expense. As I also mentioned, we will and need to invest in people.
It's not like that we want to become very strict or anything, because we have future growth areas we want to invest in. We want to invest in new customers. We also want to invest in very important areas, as previously already mentioned, cybersecurity, <neo>, AI. This is so important. Again, the quality of our products, our IVU.cloud business, all these are areas we will not stop investing, and that means we invest with people. However, we do see a slow in our personnel expense. By the end of the year, we will see maybe a personnel expense of around 7%, and that is mainly also due to what has happened in the first half of the year. We have, as many companies, a salary increase, but we also had special payments, 50-year anniversary related.
That is important because people are our best assets, and it was well appreciated in the organization. We also see a slowdown of our FTE, meaning this is for this year, by the end of the year, very, very much lower, maybe only around 2%. In the first nine months, we will see a little bit higher, as you can see, still the 9.3% personnel expenses, but they are mainly still from the effect we mentioned in the first year. There is a slowdown.
Maybe just add one point, connected with the international growth. I think that might be also decisions we might take to say, "Okay, we have a good experience to have, I would say, small but not too small teams on site." Surprisingly, even in the very costly Switzerland, we have grown a lot because now we have 35 people on site, and it pays off because it is more local, more closer to the customers. That might be also connected with the international growth that we might have local teams to come up internationally. Are there further questions?
Yes, we have one question here. I think it is a short one. "Good morning. It seems that EBIT, gross profit was much higher in Q3 than on average in nine months. Why was that?" If you look at this, we see a nine months gross profit of 70.5% to 21.3% in Q3. Our EBIT. Let me call it, we will always see this over and over, and I really want to answer this question again by reminding everybody, we need to look at our business, how it is changing due to the recurring revenue portion that is increasing. Whenever we start looking at purely at quarter numbers, then we have to keep this in mind. Whenever we look at quarterly numbers and we are looking at the full nine months, we also need to see what has happened in Q1 and Q2.
In Q3, we also see that. Hang on, can I see the numbers maybe again? Here we go, I see the numbers. What we see is that our EBIT was very strong in Q1 and Q2. Please keep this in mind. That is what I mentioned about when we look at Q3, we need to see what has happened in the first half. Especially Q2 was a very, very strong quarter. Therefore, of course, this has an impact also on the following quarters. The Q1 and Q2 was very strong, and therefore, if you look at the Q3 separate and only at the quarter, please keep this in mind. Hang on, I think I can make this bigger.
Because we both are wearing glasses, so it is difficult to see. Kai Kindermann. "Hello. Thank you for this interim call and the presentation. Could you provide some further insight on the Q3 personnel expense growth of only 1%, which I believe was even below the limited growth in headcount?" Yes, as I just mentioned, for the full-year, we expect personnel expenses to be around 7% higher than 2025. As I also said, this increase is mainly driven by the first half of the year, special items, the salaries, and also other impacts. A t the end of the year, we will only see round about a 2% FTE increase. Maybe looking at the third quarter gives us quite a good indicator of the underlying cost level if you take all the other effects out.
Then you do see a 1% increase on a year-on-year basis. This 1% above the prior quarter, I think this reflects, again, our more selective approach of hiring and also replacement, how we do this, but also other efficiency measures, which actually also means that we have people freed up capacity, for example. They can start also doing much more different things. The full-year increase should therefore not extrapolate it into the rest of the year.
Thank you. With an eye on the time, maybe one to two more questions.
Y es. I think that is one for you. "init innovation in traffic systems SE issued profit warning citing cost pressures at their customers. Are you seeing similar headwinds?" Maybe I start in one thing and then you follow. First of all, we are not the management of init innovation in traffic systems SE, so we also have to look at their quarter report and to see what has happened here. F or us, what you can see, we see different effects, we see different numbers. Our business seems to be totally different in some ways. Maybe, Martin, you can give more insights on this.
Yeah. I think that's good that inside our industry, I think we are not finger-pointing at others, but also we have to cooperate, we have interfaces. I think we like if our business software telematic systems for public transport are demanded and are delivered. That's what we are working for and not looking at the others. I'm also a little bit uncertain about the reasons. I don't know what the oil price affects, but also maybe that we have some differences which might also make a difference right now. We are more focused on software business. We have some hardware which is needed to do the software business. For example, these very special onboard units. You may have noticed some earlier on the InnoTrans slide. We have to do something there, but the way we do it is, I think, being also very safe.
You have a supplier which is in Germany, not far away in Brandenburg. He is, I think, well prepared if there might be a scarce of resources, of chips or whatever. There we had some experience in the past, so we always try to be able to deliver everything in time. I think the focus on software is much higher. Maybe you noticed that also it looks from perspective from outside that we're doing very similar things. We are doing overlapping things, but also different things. For example, we do a lot for railways. This is something which I think we have shown that this is also very substantial, not only from the current earnings, but also from the perspective we have. It might be some other differences also in choosing the markets where we are active worldwide.
I think we are well positioned to stay with our perspective, and this is really a good one, and we feel that we will have the best year in the company's history, again. Let's say so much that we don't want to stop this process in 2027 and 2028. We are working hard on having every year the best year in the company's history.
Yeah, maybe we can take one more question. Maybe this is something, Martin, also for you. "You have grown by around 10% annually in recent years. Is that a rate you aim to maintain, or do you see potential for higher growth as software and recurring revenue account for a larger share of your business?"
We don't want to give too detailed indications already now, but we are not going down. We will increase our business, and I don't see any reason why it should stop. We have been in the range between 5% and 10%. This was, I think, a good and organic growth, and we don't want to stop that. As I may have shown also, a little bit illustrated, that we have at the moment really a high demand.
It is more on our side to choose how to react on that and where to go and what to do and how to choose also our investments. That is, I think, so that we have no feeling that the demand side is critical. As I mentioned, it was the organic growth, so let us see. I think that is the bottom line of what we are doing, and let us see what we will promise for the future with the, I think, annual record and other investor meetings to come.
Thank you.
Sorry? There is one question. Would you like to take it, or do we have to close?
If you like to take it, we can, yes.
Okay, let's take this one, and maybe we can do this together. " Can you please share your priorities regarding future capital allocation between dividends, share purchases, and M&A?" First of all, I am very happy to work in a company with such a solid balance sheet and with also having such a good and strong liquidity position. That allows us to really act from a position of strength, and when we see opportunities, we will be able to act. If you ask me as a CFO with regards to priorities, that is the most important, the flexibility to be able to act for our business. However, I think the company has proven in the history and also this year that we also see and think that our returns to shareholders is also important, and it will remain important.
When it comes to share repurchases, you know that we still have to think of share buybacks because it is a big part of the remuneration in this company, not only for management, also for the employees. Therefore, it is one of the obligations we have to do. With regards to M&A, I think that is in the box or bucket of my first question regarding the position of strength.
I couldn't have said better, Petra.
Thank you so much. This is on the point, ladies and gentlemen. Thank you very much. We are coming now to the end of today's interim earnings call. Thank you for your interest in IVU Traffic Technologies AG. If you have any further questions at a later date, please feel free to contact investor relations. A big thank you also to you, Martin and Petra, for your presentation and your time. I wish you all a successful day around the world, handing back to Martin for some final remarks.
Yeah, I think we are just in time, so that's what we are always trying to be in time, yeah? Our customers, but also our projects and also our software development. Let's keep this pace, and we are both happy to meet you in person, but also electronically in the near future. Thanks a lot for your very, I would say, detailed attention. It's a pleasure to have shareholders like that. Thank you.
Thank you.