adesso shows stronger profitability in the third quarter and increases operating result after nine months by 24 % to EUR 66.5 million / Sales revenues grow by 15 % to EUR 961.3 million

• Third-quarter EBITDA margin improves considerably to 11.8 % (1st half year 2024: 4.4 %)
• EBITDA in line with expectations at EUR 66.5 million, of which EUR 38.9 million in the third quarter of 2024
• Turnaround in consolidated earnings: EUR 2.5 million (previous year: EUR -0.3 million)
• Capacity utilisation further improved, with potential for more
• One additional working day in each of the third and fourth quarters of 2024 compared to the previous year

With today’s presentation of the quarterly statement Q3 2024, adesso Group confirms a significant increase in earnings in the second half of the year as forecasted with the half-year figures. With demand for adesso’s digitalisation services remaining strong, the reduced hiring momentum and further measures to increase capacity utilisation, boosted by an additional working day in the third quarter, had a positive impact on profitability. With a quarterly record sales of EUR 330.2 million (+15 % compared to Q3 2023), adesso was able to disproportionately increase EBITDA by 37 % to EUR 38.9 million in the third quarter of the year despite ongoing investments in the product business. At 11.8 %, the EBITDA margin is well within the target corridor for profitability of 11 to 13 % set by the Executive Board, with organic growth in sales revenues at least twice the market growth rate. Earnings for the first nine months of the year also improved by 24 % to EUR 66.5 million, which was significantly higher than the increase in sales revenues. With reduced hiring (+11 % to 10,215 employees; reporting date), revenues increased almost exclusively organically by 15 % to EUR 961.3 million in line with broad demand for the adesso portfolio.

In a gloomy general economic climate, adesso was able to virtually maintain the largely organic growth rate of the first half of the year with 15 % sales growth despite more moderate hiring and without significant licence revenues. adesso also benefited from the strong growth in personnel in the previous year. Capacity utilisation improved again slightly in the third quarter compared to the previous quarter, but still offers potential compared to the average of recent years. The programme initiated by the Executive Board to increase profitability with a series of measures has been effective and will be continued in future in order to achieve the target margins for the year. Following the disproportionately high increase in relation to sales revenues in the previous year (+35 %), the increase in personnel costs of 16 % again largely follows the trend in revenue. Margins were boosted by the higher gross profit and other operating expenses, which at 14 % again grew at a slower rate than sales revenues.

Most of the 17 % increase in sales in the first nine months of 2024 came from the German market. The absolute contribution from sales abroad also increased by 8 % to EUR 164.4 million (previous year: EUR 152.4 million). Sales revenues from customers in Turkey, Austria and Italy in particular contributed to this. Driven by broad-based demand for adesso’s digitalisation services, sales revenues in all core sectors increased compared to the previous year, the majority of these recording a double-digit growth rate. Revenue growth was particularly strong in the healthcare and utilities sectors, at 48 % and 43 % respectively. Public administration, the sector with the highest turnover, increased by 14 % to EUR 153.7 million compared to the same period in the previous year.

Personnel expenses, the largest expense item, rose by 16 % from EUR 572.4 million to EUR 664.7 million, largely in line with sales revenues and the average increase in the number of employees. The average number of employees, converted into full-time equivalents, rose by 14 % year on year to 9,979. As at the reporting date of 30 September 2024, adesso employed 10,215 people (full-time equivalents). This is around 7 % more than at the end of 2023. Annualised personnel expenses per employee rose comparatively slightly by 2 % to EUR 89 thousand and were more than offset by average price increases.

Due to its rapid growth, adesso continues to rely on external services, although, at 12 %, the cost of materials developed at a noticeably lower rate than sales revenues due to the measures taken to increase capacity utilisation. As a result, gross profit after the first nine months of the year increased at a slightly greater rate than sales revenues, by 16 % to EUR 827.5 million.

Other operating expenses, which had been affected in the meantime by the return to a pre-pandemic or modified new working model as well as investments in the company’s own IT infrastructure and office space, have normalised. The increase of 14 % from EUR 97.5 million to EUR 111.3 million after the first nine months of 2024 is largely linear with the expansion of business activities.

Income tax expense decreased slightly to EUR 4.9 million (previous year: EUR 5.2 million). Based on pretax profit, the tax rate was calculated at 67 % (previous year: 106 %). Even if the effect is less pronounced and tends to decrease with a significantly higher pretax result of EUR 7.3 million (previous year: EUR 4.9 million), the tax rate continues to be influenced by non-capitalised deferred taxes and constant, non-deductible expenses.

After deducting tax expenses, the consolidated net profit for the first nine months of 2024 improved and returned to positive territory at EUR 2.5 million (previous year: EUR -0.3 million). Earnings per share stood at EUR 0.16 (previous year: EUR -0.05).

Net debt fell by almost EUR 34 million from EUR -135.2 million in the previous year to EUR ‑101.5 million as at the reporting date. Working capital was reduced by 15 % to EUR 216.2 million.

In view of the improved capacity utilisation figures and stable demand, as well as an additional working day in the following quarter compared to the previous year, the Executive Board expects the positive earnings trend to continue. Furthermore, the declared aim is to return to the usual level of profitability over the course of a full year. An improved starting position in the product business from the second half of 2025 should also contribute to this. However, there are also opportunities to materialise licence income in the final quarter of 2024, which would reduce the burdens from the product business. Even without further licence income, the Executive Board believes that the earnings forecast for 2024 of EUR 80 million to EUR 110 million with sales revenues of over EUR 1.25 billion, which was adjusted at the beginning of August, is well achievable thanks to the visible progress in the core business with IT services.

The full quarterly statement, as well as a table comparing key performance indicators over a period of several years, is available at www.adesso-group.de/en/ in the Investor Relations section.

adesso Group

With more than 10,200 employees and expected annual sales of more than EUR 1.25 billion in 2024, adesso Group is one of the largest German IT service providers with outstanding growth opportunities. At its own locations in Germany, other locations in Europe and the first locations in Asia, as well as at numerous local customers adesso offers consulting and software development services for optimising core business processes. adesso also offers ready-to-use software products for standard applications. The development of an own, industry-specific product portfolio opens up additional growth and earnings opportunities and is another key element of the adesso strategy. In 2023 and 2020, adesso was awarded the title of the best employer of its size in Germany across all industries. After having already achieved first place among IT employers in 2016, 2018 and 2020, adesso was ranked first again in 2023.