Good day and welcome to today's earnings call of Secunet Security Networks AG on the occasion of the Q3 figures of 2025. I would like to welcome CEO Marc-Julian Siewert and CFO Jessica Nospers, who will take you through the figures in a moment. After the presentation, you will have, of course, the opportunity to ask questions in our Q&A session. Having said this, I would like to give the floor to you, Mr. Siewert.
Thank you so much. It is with great pleasure to welcome you all. Good afternoon. Welcome to the earnings call for the quarter ending September 30, 2025. After giving a brief feeling of the strategic positioning of Secunet, we are going to go through the financials, look at the outlook, and then obviously happy to answer all your questions. Secunet is super well and strongly positioned in the face of government technology, right at the center between hardware security, software, and cybersecurity in the cloud. We are really addressing pressing issues of our time, and that is what I see every day discussing with diplomats and politicians. There are four major facts that are driving our business and positioning. There is, on the one hand, the geopolitical situation that we all live through every day.
The start of the Russia-Ukraine war has substantially changed the perspective of global geopolitics, of Europeans' positioning, as well as the U.S. and EU relations, obviously. Cybersecurity has been there, and cyberattacks have been there for many years, yet they become ever more visible, and they become more visible with physical attacks as well. People get really aware of the challenges of our time, at least when drones are flying through airspaces. However, we have been dealing for this; Secunet has been dealing with this for many years in the field of cyber, providing really secure infrastructures and communication in the network, yet also in the clients for especially government and sophisticated use cases. The fact of the importance of sovereignty has ever more increased, especially for Europe.
We really see the need for sovereignty, and sovereignty in that sense does not mean to close ourselves off, but to make it secure and have secure stacks and sovereign solutions, especially for the most important secrets that we need to deal with. Especially the developments in our cloud are moving forward in really providing approved sovereign cloud solutions, also providing the future for our core portfolio. On the defense side, we can obviously see substantial developments with a NATO target of 5% of GDP with the special funds on infrastructure and defense in Germany. In that sense, Secunet is super well positioned to play its role and to really fulfill its purpose as we go forward, ensuring the digital sovereignty of Europe.
In that sense, and looking back at my first 100 days, if you allow a personal view, we are really working relentlessly on working with our customers, on really improving our customer journey. We are developing our strategy that is largely developing from our core in Germany that remains crucially important into Europe and also EU institutions and obviously NATO. The technology stack of Secunet is a fantastic basis for everything that we want to do in the next five and 10 years. What impressed me most is the depth and the knowledge of the teams throughout the company. In that sense, we wake up every single day to secure Europe, to secure Germany, and we are going to move further into European markets, positioning ourselves as the guardians of Europe's digital freedom.
Following, let's say, the larger geopolitical picture, we are delighted to also look deeper into the numbers that were published yesterday. With this, I'm happy to hand over to my colleague, Jessica Nospers.
Thank you very much, Julian. Also, very warm welcome from me. You can see the highlights of the nine months of 2025. Secunet is showing a sustainable growth trajectory. We have a significant improvement in earnings, high order intake, and we face a consistently high demand for our portfolio. Revenue increased by roughly 12%, EBIT by roughly 41.3%, and order intake also by roughly 7%. Going to the next slide, let me now take you through the main financial figures by starting with group revenue. You can see on this slide, as I said before, that revenue was increasing by 12% in the first nine months. There is still an effect from a very strong Q1 in the figures. You can see that the quarterly figures for Q3 are increasing by 2%. We had a normalization in Q2, but we also see the positive trend to continue in Q3.
There is a special effect that held back better development. I wanted to point out to you there was a very late decision on the German federal budget. It was approved by the 18th of September. Also, in addition, after this approval, large projects of above EUR 20 million need additional parliament approval. We saw volumes picking up since the late German Bundestag decision on the budget, and we are very content to see how things are developing. From the public sector, we can see that there's a particular increase of 9% in the first nine months, but a slight decline in only Q3 as a standalone. Looking into the specific order intake, still we saw a strong increase after budgets were approved. I will come to that in a minute. Also, the division's defense showed a very favorable increase.
Public authorities also and Homeland Security is also developing in line with expectations. Our business sector was able to massively increase its top line. You can see that on this slide, it's an overall smaller number than compared to the public sector, but there is definitely an increasing demand also from non-public customers, both from the industry division as well as from the e-health division. Coming to the next slide, we see the revenue by region. Domestic revenue is increasing. International revenue is increasing. Growth drivers are intact, and domestic revenue can stand a little bit of short-term headwinds from the legislation. International revenue, on the other hand, went up by 6%, which is also a very positive result. As Marc-Julian pointed out in his opening statement, there is a clear commitment to increase that portion in the quarters to come, and we will keep you updated on future developments.
Profitability in absolute terms grew by more than 40% as a result of a higher top line, a higher gross margin, and a favorable product mix. Also, ongoing cost discipline played a role in this. You can see also the positive effect from the first quarter of this year. The third quarter also shows a 9% increase, which is a positive trend. The overall EBIT margin rose from 6.9% in the last year to 8.7% in this year. Also, you can see in this development, margin is still under the or below the expectations for year-end. You can see that there is also a very big impact of the fourth quarter onto our numbers. Next slide. You can see the cash flow development. Cash flow started as usual with quite a high balance on balance, cash on balance.
We had a little inflow from operating activities. Cash flow from operating activities was a bit lower compared to last year, reflecting quite an increase in inventory that we built up during the year on purpose to foster year-end growth. Due to the fact that the parliament and the Bundestag, they had quite a late approval on the budget, we needed to make sure that we are able to deliver. We built up our inventory a little bit beforehand, and that is reflected in operating activities cash flow. Cash flow from finance and activities is at the same level as usual, reflecting the dividend that we pay out in the first half year. Next slide, we can see order intake, and I think it's quite impressive to see order intake, first of all, in the first nine months and also in the third quarter, particularly.
We were still able to manage an order increase despite the non-approved budget, which makes us a little bit proud. We are quite content with the development of order intake under the current situation. Yeah. With order backlog also showing an increase, and particularly starting with an order backlog that developed favorably already by the end of December. We kind of took, let's say, EUR 30 million for the first quarters out of this order backlog to turn it into revenue. Still, we could not only fill this, let's say, gap that the first quarter caused, but also increase order backlog quite considerably, given the current circumstances. Oh, and this is it. There is the outlook. Before I comment on the outlook, we can see a typical seasonal pattern here. You see, also in the past year, every quarter shows an increased level of revenue.
Q3 and Q4 are, as usual, the strongest quarters, both with regard to revenue and also to EBIT. From last year's figures, you can see that almost 100% of EBIT was generated in the second half of the year. We had only a very small positive result in year-to-date June. This year was a little bit different because we started so favorably into the year, already being positive after the first quarter and then contributing further EBIT as the quarters went by. You can see we had strong first, second, and third quarters, but still the fourth quarter is also expected in this year to provide the biggest amount of sales and also the highest EBIT contribution. This leads me to the outlook for the full year.
Since revenue and earnings came in on a good level after nine months, we confirmed our guidance yesterday and specified margin ranges in terms of EBITDA and EBIT. While we left our revenue expectations unchanged, we are now expecting to hit both margin ranges in the mid to upper end of the corridor. This is what I would love to give you on the way and now open up the Q&A session. Thank you for being here.
Yes, thank you for the presentation. We now come to the Q&A session. For a dynamic exchange, please ask your questions personally via the audio track. To do so, click on the "Raise Your Hand" button. If you do not have the opportunity to speak freely, you can also place your question in the Q&A chat. We already received one raised hand. I would say, Mr. Kalivoda, you should be able to speak now and place your question. Yes, Mr. Kalivoda, you can unmute yourself now if you want to speak and place your question.
Hear me? Hello?
Hello.
Yes. Super. [Foreign language] . Yeah, thank you so much, Ms. Nospers and Mr. Siewert and Marx. I have two questions. This household government budget, maybe you can specify a little bit, can we or maybe you can mention a certain kind of volume or next decisions? Can we account on a certain volume or order intake? And my second question is your wait a bit. Yeah, my second question is your foreign revenues were slightly down. Maybe you can shed some light on that, what have been the reasons, and what do you expect for the coming year in regards of foreign revenues and earnings? Thank you.
When it comes to order intake, we can see a favorable development in line with what we expected. It is also the case that we did not only wait for order intake to happen, but we already discussed with all our customers to see what their demand will be and how far we can support them in their customer journey and what kind of projects they plan to realize when it comes to the current, but also the next year. We were prepared for most of the orders because projects were already known to us. We already worked on inventory as a few inventory items, particularly the secret products, take a little bit of time to be produced. We had a pre-production of them very much in line with what we expected would be the, let's say, top sellers, and actually that paid out.
This is a little bit of an unusual development for us to get our working capital balances up before we received the orders. We have made good experiences with that during COVID, so we were prepared for a positive order development. The international sales, they took up with a 6% growth compared to prior year period. It would be nice if you could maybe specify your questions with international sales.
Yeah. Percentage-wise, I guess it's percentage-wise, which is mainly due to the fact that the national revenue has substantially increased.
Yeah, the share of the revenue. The growth rate of domestic revenue was higher than growth rate of international, so there was a little bit of a higher share in domestic revenues in total, yes.
Okay. Yeah, [Foreign language]. Thank you.
You're welcome.
You're welcome.
Yeah, thanks for your question, Mr. Kalivoda. I'm waiting for more participants raising their hand or writing a question in our Q&A chat box. This is not the case by now. Mr. Fischer is raising his hand. Mr. Fischer, you should be able to unmute yourself and ask your question. [Foreign language] Mr. Fischer, you should be able to unmute yourself. We move to the Q&A chat. Can you give an indication on how high the revenues are next year in terms of million EUR? It's a question by Nils Herzing.
Thank you for your question, Mr. Herzing. We currently are still working on the budget for next year. We have a very favorable geopolitical outlook, as Julian just said before, but we are usually never commenting on the revenue level for next year before the year has started. I cannot hear you anymore. You are.
Mr. Kalivoda is raising his hand again, and I get back to him. Mr. Kalivoda, you should be able to place a question if you have another one.
Yeah, can you hear me? Hello.
Yes.
Yeah, super. Yeah. It is possible to read so much about zero trust architectures and where there are new technology also in the cloud. I think you have also a technology which is similar, or is it that you, based on R&D, are developing your software on and on to become more perfect? Also, what do you think about this zero trust architecture? This would be one question. The second is, I think you are so successful with this SINA family biometric border control. Has the order intake been stable, or has it grown a bit on this technology?
I would try to give an answer, especially on the technology stack. So indeed, everything in the public cloud is now based on zero trust. We have developed our own very secure cloud stack and specific layers that I would say you can't give it a name, but it's going beyond zero trust. It is really the reflection of what we consider the certified levels on the hardware stack that we transform into the cloud. So zero trust is the basis, which today it's basically describing everything that's going into the internet can be compromised, and we are working against that.
You have to identify every single device that speaks to each other in a zero trust logic, while we are going quite some steps beyond with our technology stack in cloud infrastructures and really aiming to really fulfill all the specifications that are needed today in the SINA ecosystem. Matching the same in the cloud. This goes to the levels of really secure cloud computing for German FAOS NFD, but also all the way to NATO secret levels. I hope that answers the question. It is basically putting zero trust in the perspective of our technology stack. Second question, I think it is a great question. Thank you for raising it because we have substantial great news on the European Entry Exit System that you might have seen throughout the various news outlets.
You can see the devices in the airports and the border control throughout Europe is changing to become much more advanced and digital. It's a project a couple of years old, and I would really say that in this field, we have developed to be not only a substantial player, but probably one of the leading ones.
Good. Danke. Super. Danke. Merci.
You're welcome. Thank you for the questions.
Thank you. We received another question in the chat box. I will read this out. Could you specify what portion of your revenue is recurring, and will you provide such figures in the future as the cloud transformation progresses? Additionally, could you update us on the progress you have made recently in your cloud transformation efforts?
I can maybe take the question on the recurring revenue. I can say that we may not have classical recurring revenues if you consider recurring revenue to be really bound by a contract. We have quite a high level of repeating revenue, at least a third to half of our sales, I would consider repeating due to the regularly revolving regeneration cycles that we have in our business and also the good demand, the good continuing and also very reliable demand we see from our SINA customers. Certainly, the more we turn into a cloud and as a service company, the higher the classical repeating, sorry, recurring revenues are going to be. We will certainly think about reporting a different set of KPIs in the future, but certainly also not in the very foreseeable future.
Julian, would you like to comment on the question on the cloud? Thank you.
Yes. Thank you so much, Mr. Fischer, for raising it. It's great news that we should probably put into the call as well to have some highlights. Definitely, one of the highlights is winning the Cyber Innovation Award from NVIDIA with our NVIDIA Cloud Stack. So it's a stack that allows NVIDIA products to run, especially for learning models and teaching models, to run in a secure environment, making them available for government customers that need to have a certified cloud stack. There will be a number of official handovers will be coming. We will definitely follow up if there has not yet been a press release. Yet there will also be an official handover ceremony. It's not a clear answer, but definitely there will be one. Thank you for raising it.
Thank you very much. We come to Mr. Cohrs. Mr. Cohrs, you should be able to place your question.
Yes, hello. I hope you can hear me.
Yes, we can.
Christian Cohrs from Warburg Research. I have one question related to your actual platform. How much, based on the current platform, can you grow the business? Year to date, if I'm not mistaken, in your quarterly report, you have increased the number of employees by 8%. Cash flow from investing activities has come down in the first nine months versus the previous year. Usually, when it comes to growth, you either have to invest into people or into assets. Maybe what is the approach there? Is there more to come? Will you expand your cost base, or do you have everything in place and simply wait for the top line? Thank you.
There comes a very clear it depends answer from me. It depends very much. There are areas of our business where we certainly have a very good asset base and also a very good base of people that we have there, but also given the technology that we love to further develop. We always kind of develop in line with our customer experience. Certainly needs further people to grow. We are planning to grow the business quite substantially. Yes, there will be more people onboarding. The low CapEx during this year, it is in case relating to, let's say, 1/3 of the lower CapEx is relating to the e-health market, where we see a sudden change, or we saw a sudden change to an as a service market.
Now the as a service market is taking off, but quite slowly because also the old connectors, they were quite surprisingly prolonged by Gemalto to, sorry, by [Gemalto] to continue to be approved. Let's say the service market is not taking off as fast as we had wished for it. We clearly took a balance with the data centers that we are only building up in line with the business. We saved quite some cash there. In addition to that, we, let's say, have a few projects, not so much business related, but also a little bit digitization related that did not take off as quickly or did not take as much CapEx as initially expected so that we, let's say, make a very good impact on the cash flow this year.
Okay, thank you.
Thank you very much. There is one question in the chat box. Are SINA products ready for challenges regarding new confidentiality risks coming from quantum computing?
Yeah, thank you for the question. I'd like to add one sentence before because this relates. Besides everything that my colleague Jessica mentioned, we are really focusing on platform arising, on putting the entire portfolio in scalable platforms. For this, on the one hand, we will be able to grow much faster with a proportionally less increase of people. Yet we will, to fulfill our plans, have to further increase people as well. This leads me into the SINA quantum computing question. Thank you very much for that. It's a super important question. It relates to what we call encrypt now, decrypt later. We have to make sure that whatever we encrypt today in terms of secrets cannot be decrypted at least for 10 years, rather 15 than 10.
We have to make sure today that whatever we encrypt today cannot be decrypted by potential leaps in quantum computing, in post-quantum technology in 10 years from now. This is where we really have, where we are really ahead of competition because we have the core products not only ready, but also in certification or already certified. It is one of our real technology or technological focus areas. Yes, I guess we have quite a leap there.
Thank you very much. There is one participant raising his hand. We get to you, Mr. Wolf. You should be able to speak freely and unmute yourself to place your question. Mr. Wolf, you have to unmute yourself.
Yeah, nice.
That sounds good. Perfect.
Okay, great. I have the following questions. Obviously, the business sector has developed quite nicely over the last two quarters. Is this kind of the new normal, in inverted commas, level that we can rely upon going forward, or was this mainly characterized by special projects that you could carry out? That would be my first question. The second question is related to the special public funds. Do you already see tenders in the pipeline coming up, or what is your expectation here going forward with regards to those? The third is related to the digital euro, obviously. Secunet was mentioned or has recently been mentioned in this context as well. Could you give us a hint what the opportunity might be for Secunet with regard to that project? Thank you.
Great. Should I start? Jessica, are you?
Yeah, sure.
Maybe I try. The business sector is there was a lot of effort put into the business sector over a long term, and it's really picking up. I would expect it to continue developing well. We have, I think, from a reporting perspective, the business models are also changing, as my colleague Jessica mentioned before, as we are moving in certain areas from a delivery business into an as a service business, which for us is a great opportunity also to work in increasingly modern business models. We will probably be very transparent around the reporting. Yet we will see probably changes in the business models while the sector is going to continue growing nicely.
On the second question, I think we have, in terms of the, I would paraphrase it in a way that you're asking about the projects and tenders that are coming up in the core business. I think our sales teams have quite a good view on what is coming. The precise timing between now and, let's say, end of next year is really depending on the German households' allocations and approvals. There are certain approval steps. Yet we have quite some visibility and see also progress in all the areas, I would say, that we play in. Concerning the digital euro, it's also a great project for us. As much as I can say is yes, that we are involved with security features and secure developments for the technology stack.
Thank you.
Yes, thank you very much. At the moment, there is no raised hand and no question in the Q&A chat box. I'll wait a few more moments. This is not the case. From this point, thank you very much for your questions to all the participants and your shown interest in Secunet Security Networks AG. Many thanks to you, Mr. Siewert, Ms. Nospers, for the presentation and the time you took to answer the questions. If there are any further questions at a later date, please do not hesitate to contact the Investor Relations Department with Mr. Christoph Marx. I wish you all a good day, a successful time. Once again, for the last and famous words, I hand over to you, Mr. Siewert.
Thank you so much. Thanks, everyone, for participating and for your interest in Secunet. I would say there could not be any, and this is really my perception of the first couple of months, there could not be any neither stronger purpose nor better business proposition that we start with at Secunet. We are going to have exciting years ahead. We look forward to exchanging with you. We look forward to your interest. We look forward to speaking throughout the rest of the year and beginning of next year. Thank you for the interest. All the best and see you soon.
Thank you. Goodbye.
Thanks. Bye-bye.