JDC Group AG (JDC) Earnings Call Transcript

Hello, ladies and gentlemen, and a warm welcome to today's earnings call for the JDC Group following the publication of the financial figures of Q1 2025. The CEO, Dr. Sebastian Grabmaier; and CFO, Ralph Konrad, will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to the Q&A session, in which you will be allowed to place your questions. Please note that the management team has another meeting right after this one, therefore we unfortunately cannot exceed the time set for this meeting. With this being said, I'm happy to hand over to you, Sebastian.

Thank you, Jana, for your kind words. So a very warm welcome from the entire Board member team with JDC Group. So with me in the line is of Ralph. And this time also, you can see Ramona -- Dr. Evens and Marcus Rex so welcome. Yes. So a strong start into the fiscal year 2025. So we are very happy that quarter-over-quarter, we can present very nice figures with an organic growth between 15% and 20% as we promised. And then you can see that all our guidance and goals are well in sight. So I'm Sebastian, Co-Founder and CEO of JDC Group. And with me here in the line is Ralph Konrad. I am responsible for Strategy Products and Investor Relations, Public Relations. And here's Ralph.

Yes. Hi there. I'm responsible for IT platform, finance, legal and M&A. Sebastian?

So yes, Ramona and Marcus, we introduced. So one slide on our business. Most of us -- or most of you know us pretty well. So we are now a classical platform business. That means we take in the data of all the financial service product providers. That's more than 220 insurance groups now, all the asset management platforms, investment companies, the mortgaging banks. We standardize the data, we process the data and then we make the data visible in all kinds of systems, our own or the systems of our intermediate clients and provide the data to individual brokers and agents, more and more the German banks, the insurance companies and via our smartphone application also to our 200,000 direct clients. Right now, we have about 6 million data sets contracts on the platform. So many contracts have many data -- more than one data set. So this translates to almost 3 million contracts with about 2.3 million clients. Yes, we're one of the best established tech stack, and we see ourselves as a tech leader in the processing field of insurance contracts in Germany. So yes, we are very happy to introduce you these figures for the first quarter 2025. You can see that we have a nice turnover growth of almost 17%. So turnover growth grew from EUR 53.3 million to EUR 62.2 million. We see well in line with last year's results. So after this dip we had due to the Ukraine and energy crisis, you see quarter-over-quarter over-quarter that organic growth is more than 15%. And you also see that the platform is scaling up. And now EBITDA grew by almost 24% from EUR 4.1 million to EUR 5 million. So a very good start into a good year 2025. Yes. So to make a little bit more difficult for you, we changed the structure of our company from time to time. What we did end of last year was that we had 3 banking licenses in the group, one in Austria and the other 2 in Germany. One with our -- the biggest one with our FiNUM company in Berlin, the other in Vienna and the other was our liability umbrella for our Jung, DMS intermediaries. And obviously, there are synergies in combining these 3 licenses into one, and that's what we did. And we moved it to the biggest license that's FiNUM.Private Finance in Berlin. And therefore, about EUR 2.7 million in turnover or EUR 0.1 million in EBITDA moves from the Advisortech segment into the Advisory segment. So the rest of the figures stayed the same. The overall company view is the same. It's just if you look at the individual segments, then there is a little change between Advisortech and Advisory. And this is why if you see our press release, there's also a pro forma figures inside. So that's basically the more realistic growth rate. And you see the real growth rate as to the new allocation of the segments. Advisortech growth looks a little bit too small and then Advisory growth looks way too big. But now we think it's the right allocation as obviously, liability umbrella business means that we have a direct client contract. And this means it's the better home for these clients and contracts is indeed the Advisory business. So the -- our segment allocation becomes more right than it was before. So saying this, so we give you like 2 sets of figures. One pro forma is what is much closer to the truth. And there you can see that, as I said, overall turnover growth is 16.7%, Advisortech grew by 18% and Advisory by 18.8%. So quite stable growth in both segments. But as to this reallocation, you can see that Advisortech now looks smaller or growing smaller with 11.3% and Advisory, therefore, looks at outstanding growth is 55.9%. But as I said, the green figures here are the more right figures. So this is as if the allocation or reallocation has been performed last year. So as we said, we're very happy that the growth comes from all product groups and all business lines and also all sales channels. You can see that, again, our investment financing business is up by 23% so a marginal EUR 4 million on top, but also insurance is growing strongly. And again, Q1 is the recurring revenue quarter, and this is very impressive that also here, we are already at a double-digit growth with plus 13%. And then you can also see that real estate, mortgage, all the alternative products are back growing with 19%. So overall, very happy that all product groups are contributing to our overall growth. So same goes for the sales channels. You can also see that the broad IFA business grew by about 18%. After taking out the liability umbrella, officially, it's 9%. Same growth as in major customers growing with 20%. Advisory, very nice growth figures as well. So we're back at growth of almost 19%. So adding up that now, you can see that the relevance of major customers are increasing. We are now at almost 30% participation of the major client segment as compared to 70% now in the broad IFA business.

Okay. Then let's go into the comparison by quarter. If we look at the situation by quarter, we have seen a very dynamic development after the impact of the Ukraine crisis before this. And since then, our group has grown double digit and 2025 is the first year in company's history with the Q1 starting with more than EUR 60 million turnover. It's almost as strong as the Q4 2024, and this was the best quarter in company's history. So a very good start. And as Sebastian mentioned, it's very nice to see that the seasonality of our business remains the same over the years. Only the level is increasing year after year. And this is a result of our growing asset base in the insurance and the investment segment. And we all can see and feel the impact of this worldwide tariff discussion everywhere and the word Liberation Day will surely be the onward of the year 2025. But although there is a lot of uncertainty in the capital markets, we have a positive view and a positive forecast for the further development of our group in this year. Sebastian will elaborate on this later on. Yes. As Sebastian mentioned, due to the group's reorganization, the segment report also shows pro forma figures for the year 2024 for both segments. The column 2024 adjusted shows the figures 2024 as if the reorganization had already been effective last year. And like in the previous quarters, the Advisortech segment showed a very strong performance. The revenue was up by more than -- by 11.3%, adjusted 18% to EUR 53.8 million and EBITDA increased by EUR 20.3 million or adjusted 23.7% to EUR 5.0 million. Due to this reorganization, personnel and operating costs fell in the segment, but even adjusted, we only see a very little movement in the cost basis, and means that costs are more or less stable. And this was different in the previous quarters where we had the consolidation effects of the top 10 group means that we already compared a quarter -- the actual quarter with the consolidated top 10 group comparing it to a quarter last year without the consolidation of the top 10 group. And the first quarter 2025 is the first full quarter without these consolidation effects. Top 10 was fully consolidated Q1 2024 and 2025. And against this background, the figures are often -- are even more pleasing in my point of view. The Advisory division continued its very good development 2024 and showed also a strong start into '25. Revenue grew by 55.9% pro forma 18.8%, which is, as Sebastian mentioned, rather the real growth to EUR 13.6 million and EBITDA grew by 80.4%, pro forma 53.6% to EUR 1.2 million. In our opinion, very convincing figures, representing the best in history first quarter for our advisory business. And thus, a big special thank to all advisers who decided to work exclusively with us and to the whole team of our FiNUM Group in Germany and Austria. This is a really excellent development. Let's come to the cash flow statement. We started the year '25 with cash and cash equivalents of EUR 24.7 million. Cash flow from operating activities in the first quarter amounted to EUR 6.3 million, which is a plus of approximately 60% compared to the previous year, very good development, which makes us happy. And in contrast, the cash flows from investment and financing activities are only slightly negative in this first quarter because we had smaller capital calls from Summitas, only smaller capital calls, and we were not active in buying back shares in the first quarter, which was the case in the first quarter last year. So cash and cash equivalents increased by EUR 4.1 million in the first quarter to EUR 29.5 million. Cash on hand last Friday, some days ago, was EUR 32.9 million. As always, some information about share price and the bond. The share price was very weak the last weeks. You know this, and it's now developing positively. We saw EUR 21.4 at the end of close Friday. And Sebastian will give you a little bit more color on the development of the last weeks in a few minutes. We are happy that the market has responded positively to our publication today. Share price was up to EUR 23. So market cap is now again around EUR 300 million. There are no changes in our treasury shares. We still own 147,000 shares -- JDC shares. There's no change in the bond as well. It's valued at EUR 20 million. Trading is stable at 105%. Obviously, bondholders are happy holders. The first termination option is beginning 1st of November 2026 for the bond, and the bond is due by the 1st of November in 2028. Shareholder structure shows no changes. Okay. Let's come to the spotlights. We have 3 spotlights for you. The first is to give you some color on platform activity. some further thoughts about Liberation Day and what -- how is the world developing and what is the influence on us and some insight information about the last weeks and the share price. Okay. Operational key figures. They have developed also very positively, but we start with a number that seems to be negative. The number of orders decreased by 4.3%. But nevertheless, the expected commission from these orders increased clearly. The reason for this is that we have processed much more orders in lines with higher commissions like life insurance, supplementary health or health insurance. And we have a smaller decline in the P&C business where we received lower commissions. So you will not see influence on the P&L -- you will see positive influence in the P&L from this development. The number of contract transfers continue to grow by 14% significantly. And let me please mention from an already very high basis. Assets under administration, where some parts of them are assets under management, in our own asset management division, increased by 6.5% to more than EUR 7.5 billion, and a very convincing development is shown by the annual net premium of our insurance assets that grew by more than 15% in only 1 year and is now approaching the EUR 1.4 billion mark, which is a great development. To summarize, we see a further continuous development of our key operating figures and that since years. And please allow me to add that this development did not fall from the sky, but is a result of ongoing sales work over many years. And at this point, even if this is rather unusual for a CFO and especially for me, I would like to thank our sales colleagues, good job, Marcus and sales team and also to all others who develop IT operations, HR and all other important areas of the group. That's it from my side, Sebastian.

Yes. Thank you, Ralph. Yes, just some words on Liberation Day. You could see that many of us were in shock when this beginning of April, this announcements were made. And you could see that basically stock prices went down quite a bit. There's the good news. There is no primary effect at all on our business. So we do not have any trade relationships. All the products we need is software with European contracts. So we have no direct influx of or importance of any tariffs. And the only little thing is that, obviously, if capital markets are concerned, our trailer fees basically trail with the capital markets. But again, here, DAX was at a record high this morning. So in Europe, we are back on track and also the U.S. is trading just -- I think it's 8%, 9%. So there's hardly any primary effect. Secondary, obviously, we are dependent on consumer confidence. Obviously, in April, that was quite low. This means that customers are buying less in funds and security, but interestingly, they're buying more in insurance. We don't have the April figures yet, but we can see that also here, there might not be very big effects of this impact on the markets. But still, the share price showed a little bit different picture, maybe Ralph on the next page, we can see that our share price took a hit, but this was not really -- maybe close the window real quick, as we are sitting here in the Equity Forum in the hotel in Frankfurt. Yes, thank you very much. So you can see that it seems to be that our share price took a hit by tariffs or discussion about that, but actually had a completely different reason. There was one of our dear shareholders that was a long-term holder with about 200,000 shares, who sold his fund company to a company that did not like small caps. And after -- well, we gave them a buyer, but obviously, that was very hard to find a price in these volatile markets so they just sold it in smaller blocks and a lot over the public counter. And then you could see that share price went down almost to EUR 18. But the good news is this block is bought, and you can see there is the recovery. It's quite the same as actual V-shape. So good news is that the sellers are out and then there are more buyers again, and this is always what makes markets right. Yes, some words to guidance. I think, Ralph.

No, your turn.

You can see that, it's a good slide to comment. Actually, you could see that we gave the guidance out. The median is EUR 255 million with EUR 62.2 million turnover in Q1. We are well on track here. So we see that that's a very feasible turnover number and also EBITDA with EUR 5 million EBITDA in Q1 already, which is like the third time we could reach EUR 5 million in a quarter. We are well on track to reach our -- on average like in the median EUR 19.5 million. So we are very confident that these guidance figures just look right to us. And also our sub goals, we are well on track with these. We will report more ongoing in the year. So I think our strategy to tell you what we are doing and then we're doing what we are telling, I think that's, again, a very good outlook for the year 2025, and we're very confident to reach our goals here. Yes, outlook 2030, this slide was the first time shown after our full year figures in March. And just to explain a little bit on this, if we just go on with our organic growth, 16%, 17% on average year-over-year-over-year, you just come mathematically to a turnover of up to EUR 500 million. So always just execute on the existing contracts. So this does not include an amount of new clients or new brokers and does not include any M&A transactions. And we know when we reach turnover of EUR 450 million to EUR 500 million, then EBITDA will stand at EUR 40 million to EUR 50 million and with EUR 50 million at a normal platform multiple, and this is what we also gave you, we could envisage a valuation of EUR 1 billion plus. And this is why Ralph and I decided that it's worth working here. It's a good team spirit, and we all fight for these goals. We want to give you these turnover and EBITDA figures, and then it's up to you to give us the valuation. All right. Thank you very much for your attention, and we are happy to take any questions you might have.

Yes. Thank you also very much for your presentation. We will now move on to the Q&A session. [Operator Instructions] We will continue with the first callers. The first questions are going to be via text, which I will read now.

Andreas.

First question is, you are close to record cash levels at EUR 30 million gross and plus EUR 10 million net and no dividend and/or buyback ongoing. Are you confident in deploying this into M&A during the year since not returning it?

The answer is yes. Yes, Andreas, thank you for your question. We are very confident. But as always, right, targets are signed when they're signed, and we will just shut up until this moment.

Thank you very much. His second question is with close to EUR 1.5 billion insurance assets, are you having more leverage with insurance companies to get better commission and increase your gross margin?

Definitely. Ralph?

Yes, the answer is yes as well. That's a day-to-day work in our product management division where we talk to insurers and asset management platforms and discuss if the actual commission levels are the right ones. And we are improving commissions not like one big step, but it's rather 1,000 steps with all the insurers, and you will definitely see this in the P&L in the future.

Thank you very much. And Andreas' third question is, there has not been any news out from existing Summitas this year and lower capital calls. Is it harder to get more deals done now?

I think there was 2 smaller news. Summitas bought another broker in January and also 1 just a week or 2 ago. So you can all reckon that Summitas buys a broker -- 1 broker every month. But obviously, after this very big transaction in December, there's a lot of work ongoing post-merger integration, all -- bringing all the finance into -- in line. But we are very confident that, let's say, the rest of the money back can be invested within the next 12 months. So there is some of the debt or like of the credit line is left and also some of the equity. So we, as JDC, think that we will spend the rest of the EUR 5 million outstanding. We'll be able to spend in the year 2025.

Thank you very much for answering that question. We will move on to the next person, Tobias Sinding, who also has about 6 questions. He says, congratulations on yet another successful quarter. The first question is, there is always a combination of factors that lead to outperformance, but what were the main drivers to the strong performance in advisory?

Good question. I think we had harder times during the Ukraine crisis where it was not -- where it was easy for our platform business to grow, but harder for the Advisory business because a lot of Advisory business is still in personal contact or done in personal contact. And now we have like the third year without any heavy influence from outside where people can concentrate on doing their business. We have done some operational efforts to improve the business environment. And to be honest, there's no one magic reason. I think we -- it's a result of 3 years hard work in the right direction. Sebastian, would you...

No. Maybe what we said before, the tailwind is on, the tailwind is on all business lines, and especially real estate and mortgage is a higher part in Advisory than in Advisortech. So they are now benefiting from these overall good market factors.

Yes. And the asset base is high due to the market development. And your second question is, I'll make it short, if the percentage of the Advisory business is increasing and the percentage of total business or total turnover? That's not what we think. We think that the Advisortech business is growing faster than the Advisory business because it's easier to put people on the platform with a nonbinding contract where they are not exclusive. That's what we do in the platform business. And in our Advisory business, people decide to work exclusively with JDC. So this is harder, but it's also -- will also show a double-digit growth.

Thank you very much for this. His second question is, how should we think about the higher percentage of Advisory commission going into 2025?

That's what I answered in this question, so we can go to the next.

Okay. So those are 2 questions in one? Perfect. And third question is there are salary increases of 21.6% year-over-year in HQ. Should we expect the current level to stay flat over the year? Or will there be more increases?

No, we will see increases. But as mentioned, the cost base is more or less stable. We had a lot of increases due to inflation in Germany. We are trying to grow without hiring lots of people. We have some key hires that we will see in the next month, but we think that the growth of the personnel cost increase will decline.

But I think HQ means headquarters, right? So that's the holding. And the main factor...