Good afternoon, ladies and gentlemen. On behalf of Montega, welcome to the JDC Group earnings call regarding the results of the first quarter of 2022, which will be presented by the CEO, Dr. Sebastian Grabmaier, and the CFO, Ralf Konrad. The floor will be open for all upcoming questions following the presentation. I now hand over to you, Dr. Grabmaier.
Yes, thank you, Mrs. Schilling. Very warm welcome from the side of JDC Group. My name is Sebastian Grabmaier, together with my partner, Ralf Konrad. We'll lead you to this presentation on this very challenging day, as I might say. You could see, nevertheless, it was a very promising start for JDC Group into the year 2022, with quite pleasing numbers, as we will show. As I said, my name is Sebastian. Responsible for strategy, sales, products, IR, and also data security in the JDC Group. The third in the row is Stefan Bachmann, not here today. We acquired five years ago from Google, responsible for all digital means and measures within the group. My partner, Ralf, who will introduce himself.
Yes, welcome from my side as well. Ralf Konrad is my name. Responsible for IT operations, and finance, and in addition, the legal department, and I will give you some insights about our IT platform after the presentation of the figures.
Yeah, we do know that most of you know the company by heart by now. Just one slide to give you the short introduction, who we are, what we do. What we do is we are a digital service company for the processing of insurance contracts, meaning that we take in the data of 220 insurance groups, all the asset management platforms, the alternative asset providers, the mortgage banks.
We digitize the data, we standardize it, we process it, and then we throw it out in visualizing systems to all kinds of intermediaries, such as individual brokers and agents, all kinds of sales organizations, other insurtechs, fintechs, the banks, insurance companies, and via our smartphone application also to about 200,000 direct clients, either on our own devices or via our API in a bundle of interfaces to the systems of our clients. Right now we have more than 3.9 million contracts on the platform with 1.5 million clients. We operate what's the leading tech stack for the processing and what's called new German digital wallet in the insurance space.
You can see that, digitizing the insurance industry is quite a challenge, so we had years of investing into our platform. Right now you see that this is paying out as more and more of small, medium-sized, and big clients come to the platform. Now, the platform is developing quite nicely. Q1 was again a very satisfying development. We saw a growth of more than 20%. To be exact, it's 20.2%, up to EUR 43.2 million in turnover. Also EBITDA developed nicely. It's up 31.5% from EUR 2.8 million- EUR 3.7 million . You can see the quarter-over-quarter growth is around 20%, and we are on a long-term growth path, digitizing the industry.
You can see also, which is a nice development, that the growth comes from all segments and all, among the breadth of our platform business. The engine of our growth is now the AdvisorTech business. Last year you could see that also Advisory was up 20% even more a little bit than AdvisorTech because there were some effects due to COVID. 2020 there was almost no growth in Advisory. 2021 there was almost double growth in Advisory. This time we are at a normal growth rate in Advisory with a little bit more than 10% and like a, what we think a normal growth rate in AdvisorTech with a little bit more than 20%. Overall, the holding is always a little bit in minus.
It's a very nice start for the year. EUR 43.2 million, which we think is quite nicely. As you can see here by the turnover split, you can see that the major customers, we talk a lot, all these big wins and contracts that will contribute to the platform in the years to come are still quite a small segment because the most of the business comes from the broad number and big number of individual IFAs for advisory or IFA groups. If we look into the figures, you can see revenues, that's what I said, up from EUR 36 million- EUR 43.2 million. That's 20.2% up. EBITDA up from EUR 2.8 million- EUR 3.7 million. That's 31.5% up.
You will see that the gross profit margin developed quite nicely with some tailwind of the advisory business that we will see in the next slides, developed quite nicely also when it comes to gross profits and earnings. Gross profits up 32.1%. Here in the next slide, you see the AdvisorTech segment in figures. Turnover is also up 21.1%, and EBITDA is up 23.8%, which is nice, but you could say, "Well, this could have been more." That's the reason is more the backdrop that although we are winning all these very big contracts, we have also the running up costs for the very big bancassurance means and all these projects and processes.
The turnover will come kicking in starting Q3, Q4, mainly in the years to come, 2023, 2024. We will see the first impact from the savings banks business of Provinzial, and then later also of the savings banks business of VKB. As a third pillar, you read the publications on winning R+V, the second biggest insurer in Germany, with their ties to the cooperative banking segment. On these segments, we'll expect a lot of business in the years to come, but not now. There is some ramping up costs this year, so we're content with the development here in the segment. You will see also that once the business kicks in, also the earnings will grow significantly or more significant in the AdvisorTech segment.
In Advisory, you can see that gross profit margin is even up 35%, which is fantastic, at a revenue growth of 10.2%. Overall, EBITDA, you can see in this segment, as there's a basis effect and the segment did not earn much in the years before. There's a basis effect with a very nice development in earnings also. What's also kind of nice is that also our cash flow situation proves to be very nice over the last years. We also always have a little bit more better cash flows than we have in earnings. You could also see then on our bank accounts that this pays out quarter-over-quarter.
You could also notice that we had a rights issue when VKB negotiated the contract for the savings banks of southern Germany. They wanted a strategic stake into JDC that we offered them in a small rights issue where VKB bought shares for a little bit over EUR 10 million. You can also see that quarter-over-quarter the cash balance is rather higher than Q1. We know also as we pay out everything we earn in the business of Q4 2021 the Q4 being always the best quarter, the payouts are the highest in Q1. That means liquidity is a little bit higher than the quarter before, but also in a very positive development.
We did see that whenever we are not doing any M&A transactions, we're having more outflows. You will see also nicer development on liquidity as you can see quarter-over-quarter. Some further facts on our financial instruments. You know that we issued a bond with a face value of EUR 25 million that we recapped in 2019, or refinanced in 2019. EUR 5 million of it is sitting in our books ourselves, so this explains why EUR 19.4 million is outstanding debt. Yeah, you can see also the quotation is at 100% or a little bit above.
The coupon, I think, pays quite nicely 5.5% every year, and is secured bond because it's secured with the payments or the cash flows of our own contract policies that we receive as a company. Also the share price development was very nice over the last couple of years. You could also see this year being very difficult for tech companies. We get much praise from investors and say, "Well, a decline of 20% is better than 80%." Are we content or not? That's nothing we can decide ourselves. You can see also that I think right now we are at 18.9%, or I guess it was 19.4%.
The nice development is that our share buyback program that we concluded successfully, we still have EUR 505,000 own shares in our books, with an average purchase price of EUR 6.1 per share. There is some reserves of EUR 6.7 million at a share value of EUR 9.8 million of own shares sitting in our books also. This is our basic reserves. You know, still some EUR 5 million in bonds that are in our books and about EUR 9 million or almost EUR 10 million in shares in our books.
Yeah, we want, as you know, most of the presentation of the past, we have some new slides and then, we'll hand over to my partner, Ralf, and give you like a spotlight what we do to automate and to scale up more nicely and, to become more efficient as a platform. Because that's one of the key points we are focusing at after having acquired all these very, very big projects, these, very valuable customers. Now it's about executing, it's about onboarding all these individual banks and then to scale up the platform by becoming more efficient. Please, Ralf.
Yes. Thank you, Sebastian. Before I do this, I want to answer one question that was posted via the chat. The question was why did the personnel expenses grow by EUR 1.2 million from EUR 3.2 million- EUR 4.5 million? The reason is that in the first quarter, the Morgen & Morgen was consolidated in 2022 and not in 2021 because we bought the company in the course of the year 2021. I don't remember exactly, but I think the date of first consolidation was August last year. This is the reason. If you deduct this, the costs of the platform are more or less stable this year, huh? Okay, thanks, Sebastian.
I want to give you a little view on what's very important for us, and this is automation. Because of business growth and number of applications, the contract is growing. We have to take care of our machine room, and we have to do things that we do in a more efficient way. We are on a good path, which shows this graph. Here you can see the total cost of the group, compared to the turnover. Total cost grew from EUR 31 million- EUR 33 million from... No, just one slide back, please. From EUR 31 million-EUR 33 million from 2018- 2020.
Then with a little jump in 2021 because of the acquisition of Morgen & Morgen. But nevertheless, the total cost in % of turnover is decreasing very nicely. The reason is that we not only work on our platform for the brokers and the customers, but also on our internal transaction platform. Sebastian, next slide, please. If you look at this, when we talk to you or to brokers, we normally talk about that what they see for the brokers is our iCRMweb, the broker platform for customer portfolio management. If we talk to investors or customers, then we talk about the allesmeins platform, the nice personal financial wallet. Sebastian, please step back. Thank you. No. Yes, thank you.
This is all connected via our API structure to an internal system, and this internal system is called JDC Inside. What's JDC Inside? It's a collection of special purpose automation apps that feed into one workflow system, which we summarize under one common UI for our internal users. It's our internal transaction system. Our design principles are we use the existing API structure. Everything we see in our internal system could be seen in another UI for the customers or the brokers. It's fully integrated. We have no dependency on third parties. We automate as possible.
That means only in case of any exception or error, a workflow item should pop up on the screen of an internal user. If not, it should run through with a 100% black box ratio. We use state-of-the-art technology. In this year, we will integrate the first pieces of artificial intelligence in our workflow system. This is a very important thing for us. Next slide, please. Yes. We have brought with us four examples to illustrate what's happening there to give you a feeling on what we are working there.
The first is that, if a broker does a comparison on the comparison portals and then gives us an application for a new contract, this runs automatically to our system. We download the applications and the documents from the comparison portals. We identify the customers in our internal app or we create a new customer. We create the applications, we upload the documents, and there we have a black box ratio of 90%. Only if in case of an error or a data mismatch, then we have an internal user, and there, the design principle is should be a 3-click action for the internal user to take care of the error or the mismatch.
To give you some figures on this, with this app, we save round about 1 million minutes of work in the year 2021. We have more than 100,000 new applications a year. If you do what's here under point one, if you do this in a manual way, it needs 10 minutes. A 100,000 times 10 minutes, it's approximately 1 million minutes saved in the year 2021, and will be more in the future. The second example is that we created a JDC Inside mail app which imports all mails from our centralized group mailboxes. We receive thousands of emails every day from brokers, from insurers, from business partners.
For every imported mail, we create a workflow item. We lock this, control the settlement, and try to automate the identified emails, if possible, into some classifications and helps us a lot being faster in response. The third example, Sebastian, please, is our payment notifications app. Means that we do the billing for our brokers three times a month. Yeah.
Afterwards, every broker receives a payment notification that tells them, "In three days, you receive EUR 3,224.20 for this and that contract." Before we implemented this app, we needed around about one week a month to create these notifications and to bring it to the system for more than 16,000 brokers. Now, this is done totally automated with almost no error. Black box ratio is approximately 100%. The last example is our JDC Inside BiPRO app. BiPRO, as you might know, is an industry standard where insurers agreed how and which formats to exchange data with the brokers.
What we do here is that we import pre-aggregated e-XML data from almost all insurance companies at a volume that is growing much higher than 30% a year. We create automatically workflow items from each dataset. We identify existing customers or contracts, and then we enrich the data in our system for the contract or the customers. Alone in 2022, we have uploaded and imported hundreds of thousands of documents fully automatically, saving us a lot of time and a lot of work. Yeah? These were four examples of our automation efforts of let's say 20-30 that are already done. We have maybe another 40-50 that we have on our way.
We are very confident that we even in the future will be able to transact the increasing volume with not highly increasing costs. Sebastian. Sebastian? Your microphone is muted.
Thank you. The next slide shows us the guidance 2022 and achievements in Q1 so far. You noticed we guided for a turnover of EUR 165 million-EUR 175 million in turnover and an EBITDA of above EUR 11 million. You could see that the Q1 is quite in line with this guidance with a turnover of EUR 43.2 million. We are up a little bit more than 20% as compared to the around 16% that we guided. You also see that EBITDA is quite in line with EUR 3.7 million. As you know, quarters are a little bit different. The first quarter is a P&C quarter with a quite strong turnover and decent earnings. The weaker quarters is Q2 and Q3.
The best quarter always is Q4, where you could see that a lot of the earnings are made. This is why upfront commission in life and health normally is strongest in Q4, and this is also why it's the most profitable quarter. I think with EUR 3.7 million out of more than EUR 11 million, we are on a very good track to keep the guidance. This is also why we stay with the guidance despite all these factors you can see now in the markets, Ukraine crisis, inflation, China COVID problems. I think there is a challenging environment out there, but we are quite happy with what we guided at, and we think that it's still a very good base for our business.
We did not take up the guidance, although, turnover is a little bit over guidance because we don't know what's happening in the year. I think you all will understand this, that we rather fulfill our visions and our guidance than to run after it. Our goals 2022 are on a very good track. We said we would roll out further savings bank in the Provinzial project. As we said, it's right as to plan. The first 10 savings banks are onboarded to the platform. There's about 60 to come this year out of the Provinzial regions. We also said that we would onboard other public insurers. You know, VKB is a shareholder already. We are seeing them quite a lot in negotiating contracts.
Being a shareholder, we think there is no reason why this should not be happening in the course of the next months. You can see we leverage existing partnerships and improve profitability ratios that quite credible and visible in our figures already. We also are not stopping having won these very big tenders, these very big customers. We are still adding further major customers. You noticed that we published a very nice project that we have with Gothaer Insurance, that's top 15 insurer in Germany, and we'll provide our platform for their more than 1,000 agencies in the regions.
A normal insurance agent will not only see the Gothaer products but can also offer a full view, 360-degree, of the insurance portfolio of the customers, and the customers can then use Gothaer as one financial home, one viewpoint of all their financial needs and insurance topics. Yeah, we want to increase and improve our technical development, our tech platform. I think Ralf showed quite visibly that step by step, you know, the platform becomes more efficient. You will also notice we just issued that we will start our own occupational pension management platform, including all kinds of occupational insurance, such as health insurance and disability insurance.
Therefore, having a very strong tool for our intermediaries to target all kinds of small and mid-sized companies. As you might know from the insurance markets, that's one of the growth markets in life insurance. As we know that this second pillar is one of the strongest growth pillars in the life insurance industry. Something that's also on our minds every day, and it's a personal tragedy for many of us in Europe, but the good part is that our business model is not affected by the Ukraine war. In particular, we do not have any supply chains. We do not have any developments in Russia, Belarus, or Ukraine. Our IP is completely with us, and also our services are completely in-house. Despite of some.
Bad mood or maybe some reluctance of our customers to buy very big contracts when there's so much insecurity in the market. We do not have any impact of the Ukraine war. That's to our guidance. We're happy to take any questions you might have. I want to thank you for listening.
Thank you for your presentation, Mr. Grabmaier, Mr. Konrad. We will continue with the Q&A session. You can either place a question via chat. We already received some of the questions. Alternatively, you can submit your question via audio line by raising your hand. If you have dialed in via phone, please press the star key followed by number nine and then the star key followed by number six to unmute yourself. We would first of all start with some questions from the audio line. The first questions come from Benjamin Kohnke. Mr. Kohnke, your line is open.
Can you hear me?
Yes, we can.
Yes.
Super. Okay. Sebastian Grabmaier, thank you very much for that presentation. A few questions from my side, please. First one, around Morgen & Morgen, if I may, and just, you know, two small ones really. Ralf, could you elaborate a little bit if there's any seasonality in the business of Morgen & Morgen? Because, simply I don't know that business that well yet. Secondly, any update on the performance of the business and if you already realized, you know, a bit of synergy mainly around, you know, did it pay off in terms of your access to, I don't know, talking to C-level insurance companies, that sort of stuff that you alluded to at the time of the acquisition? Second one, on your... Well, maybe starting with Gothaer.
The question would be, do you expect any revenue contribution already in 2022? The reason I'm asking is I would be interested in comparing the sort of take-up and, say, aggressiveness and speed of a company like Gothaer on board or sort of using your platform rather than, you know, maybe what the Sparkassen, the savings banks. The last question, on your balance sheet, I mean, it's getting stronger and stronger, and I don't want to push you in any direction obviously, but any update on your thoughts around usage of that cash? Thank you.
Okay. Thanks, Ben. I start with Morgen & Morgen. There's no seasonality. Of course, we have some payments for the software which are done in January or February as a license fee for the complete year. If you look on the P&L, there's no seasonality at all. The performance, without giving individual figures, is comparable to the previous year, a little bit stronger, but there's no big development plus or minus. The reason for this is that what you ask, are there already synergies? Yes, we are working on, but they are not visible now. We try to marry the databases of JDC and Morgen & Morgen, which is a, let's say, deep tech action.
Afterwards, you will have the situation, and that's what we're working on. If you click on a contract in our CRM in the future, then you will immediately see evaluation of this contract. It's a good contract or a bad contract. You will immediately get alternative suggestions, and by click you will get into the deepest detail of the contract without reading the policy. Yeah. That's what we're working on. It's a big goal, but it's doable and our plan is to be there in May, let's say, seven to eight months. Yeah.
We will see a big impact of the integration in the next year.
Maybe I'll try to answer the second question. We have two types of customers, of big customers if you wish. The one, they do have third-party insurance business, such as Albatros or Bavaria, BMW or Uhlingha. They already have a contract on their books that they then transfer in bulk to our platform. That's business we like very much because then turnover is up immediately and also earnings are up immediately. Then there's this rather long-term products where contracts are transferred individually, where the customer first uses the app and then presses two clicks, and then the individual contracts just goes to platform. Naturally, these projects, that's also most of the banking products, they take a little bit longer to grow.
It depends on the speed that Gothaer is implementing the platform to the agencies. There's also good examples like Finanzguru that we started from scratch in September. Because they are very good in converting clients to insurance clients, they have now a five-digit number of contract transfers every month. We will have to see. In any case, this business also will build up over time and it will be a significant contribution, but it's still in the small single-digit numbers in EUR million.
Okay, Ben, your last question was usage of cash. We have actual cash is like EUR 25 million, more or less. The bad news is we have to do some deferred payments for our transactions, accounting for EUR 7 million-EUR 8 million in the next twelve months. Nevertheless, cash position is very strong. What I can tell you there is that we are very open for M&A activities and we would like to add some business in a transaction way. No news that we can give you today.
Sure. Well, thank you very much anyways.
Thank you for your questions. We will continue with some questions from the chat. The next question is: What EBITDA margin are you expecting for the AdvisorTech division once the major customers you won have ramped up?
The question is on, I think, the EBITDA margin of the AdvisorTech business, right?
I think that is what it's referring to, yes. Please, the person who asked the questions, correct us if we are wrong.
Yeah. Maybe, Sebastian, you can go back to the slide of the AdvisorTech segment, please. Yeah. What you can see here, revenue is growing nicely, and EBITDA margin is 3.7% to EUR 37 million, so approximately 10%. This is the first step. A lot of you asked us if it's possible to have a 10% EBITDA margin. Yes, you can see it's possible. The first quarter is normally, as Sebastian told you, a very good one, as the last quarter. I think we need some growth like 20% or something like this, then we can show a 10% EBITDA margin over the full fiscal year.
Not only in the first and the fourth quarter, but also in the weaker second and third quarter because platform is really scaling up day by day. When you look at the numbers of contracts on the platform, then it's more and more every quarter. Should be at least 10%. When we look down the road two or three years, I think we are also able to achieve, let's say, 12%-13% a year.
Thank you.
There's a natural ceiling, obviously, because if you look at us as a software company, right? The gross profit is EUR 10.2 million and EBITDA of EUR 3.7 out of EUR 10.2 million, it's already almost 40%. Then if you look at good software companies, they can grow mostly 50-something%. The natural ceiling, if you look in percentage points as to revenues, then, you know, very good companies go to 14%, 15%, and that's then. It's very hard to get a 20% earnings margin if you only have a gross profit margin, gross margin of 30%.
Thank you for answering. The next question, how high is the probability that you can also sign on other insurers of Sparkasse in addition to Provinzial?
Sebastian.
Well, what you have to know is that the three very big ones, so not only Provinzial, or VKB, but also SV, they're using the same application for their Sparkassen customers, the S-Versicherungsmanager. This is done by a company where all of them are shareholders. They could choose another platform, but maybe they won't. This is a quite likely customer. Then, the next would be in the row VGH, that likes the system also. What we hear is they might decide to use it. Yes, there is some probability to get new customers from the public insurer side.
Thank you. At this stage, a kind reminder, if there are still open questions, kindly let us know via chat or via audio line. The next question.
Sorry. Oh, sorry. I thought you were.
There are still some more in the pipeline. Yeah, just a reminder at this stage. The next question is regarding the M&A field. You already mentioned that it is of interest. Maybe you could elaborate a little bit more on how you manage your cash position of EUR 22 million. Is it in acquisitions, recurring revenues in 2022 and following years?
Yes. How do we manage the cash position? There's nobody who wants to pay us interest, unfortunately, as you can imagine. It's cash on hand. We pay interest for. Our interest is rather spending it in like acquisition or rethinking a new share buyback program could be an opportunity. If you look at the actual development, operation development goes up, share price goes down. These are always situations where management should think about buyback. That's what we do and discuss. No decision is made yet.
The third thing is, of course, we are looking and are interested in growing not only organically, but through acquisitions. There was a last part of the question. I can't see it anymore on my screen. Maybe you could repeat it.
How do you manage your cash position of EUR 22 million acquisitions in 2022, and recurring revenues?
Yeah. Okay.
in 2022 and following years?
Yeah. The last question was what is the recurring revenue, what is the portion. We still have around 60% of total revenue recurring. What we think is a very good and very stable development. If we would not grow, the portion of our recurring revenues would grow dramatically. As we grow, it's not possible at the same time to increase the portion of recurring revenues. You can think about it in this way, that if we end up at, let's say, EUR 170 million in turnover, then 60% of this EUR 170 million are recurring for the next years.
The average duration of all the contracts on our platform is like three and half years or four years for car contracts and like 10 years for the rest of the contracts. It's a very stable development. As long as we are adding more contracts onto the platform as we lose we are growing. Maybe less than in the last year, we had 120-130,000 new applications and more than a quarter of a million contractual transfers. We had approximately 400,000 new contracts on the platform, and we didn't lose many contracts. Platform is growing. Recurring revenues are growing.
The company should be more profitable year- over- year.
Thank you. How do you see the phasing of ramping the large contracts from Provinzial, VKB, and maybe R+V in the next year, next few years and in 2022?
Good question. What
Yes
Edwin, what do you mean with phasing of ramping? Maybe you could explain via the line.
Maybe we can answer it in a way of what's the ramp up plan is. In turnover, we would think that, as we said, we do not expect much revenue this year, so it will be a single-digit revenue number still, maybe between EUR 5 million-EUR 7 million. Then as we think these EUR 100 million are quite realistic from the Provinzial savings banks in the next years to come, then this should speed up, and we expect like a double-digit million number for next year and then quite some growth for the years past. This will take time, that we know.
We also know, we see at the example of Finanzgruppe for example, if savings bank branches take it seriously, the platform can really hold and manage all the transfers of a huge number of contracts. Also if you address the customers right, then they convert quite nicely to the platform. We are quite okay with the business planning we did with these partners. It will take some time, but the potential is huge.
There's also question.
Mr. de Jong, maybe you could give us a quick note if the answer is fully answered.
Yeah, it's answered. Thank you.
All right. There is one question left in the QA. It's asking if there's also a capital markets day planned in German in the coming time.
Yeah, maybe I can answer this. The good thing is that in the meantime, 60% of our shareholders are international, from Canada, United States, Denmark, South Africa, Israel. There's a need to do this in English. If you are interested in a talk with the management in German, no problem. We are available. Just give us a call and we will answer all questions also in German.
Our German is better than our English, actually.
My German is definitely better than my English.
All right. It seems that all questions are answered for now, so we're coming to the end of this earnings call. Thank you very much for everyone who participated, for your interest, and also again, Dr. Grabmaier and Mr. Konrad, for your time and answering the questions. I hand over to you for some final remarks.
Yeah. Thank you, Mrs. Schilling, for the charming moderation as always. Yeah, you can see that everything is in line. That's one of our well sayings for the last year. We do what we say, we say what we do, and you see quite nicely how now the platform develops, how customer acquisition develops, how executing on these projects and deals is developing. Also you can see this in the figures. As we said, we are very content on the development of the platform and the business in Q1.
As Ralf also stated in his citation, against the backdrop that we had a cut in interest rates for life insurance policies end of last year, we could not expect our life insurance business, which is one of our strong pillars, be so strong in Q1. We're very happy with the turnover growth and also with the earnings growth. Thank you for your trust, and thank you for listening to this presentation. Yeah, stay tuned and, there's more to come. We look at a challenging market environment, but at a very, very good development of our company in the year 2022. Thank you very much.
Bye-bye.