secunet Security Networks Aktiengesellschaft (YSN) Q2 2026 Earnings Call Transcript

Ladies and gentlemen, welcome to the earnings call of Sikonet Security Networks AG, following the publication of the first half-year results of 2026. I'm delighted to welcome the CEO, Mark-Julian Sievert, and CFO, Jessica Nospas, who will guide us through the presentation in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Mr. Sievert.

Thank you so much. And it is a great pleasure to welcome all of you today to our earnings call for the first half year. We will go through the highlights of the first half year 2026, obviously look deeper into the financials, provide an outlook, and then we are looking forward to your questions and thoughts. The first half year at Secunet was really driven by robust development and very high order intake momentum, continuously driven by the public sector, also by our activities in defense in space and homeland, all the way throughout public authority. So we were able to increase the order intake by almost 80% in the first half year compared year over year and landed at 287.4 million euros also revenue was increased significantly by almost 20% 204.7 million in the first half year and EBIT is following with an increase of even more 20.4% to 8.7 million in the first half year all of this is driven by the by the demand in our main areas of business around the Sina portfolio, but also driven by the changes that we are doing in the organization in order to really invest into the future and cater the sector even better. This leads us to specify the revenue expectations for 2026 at the upper guidance of our range or at the upper end of our range, which is 460 to 500 million. So we are aiming to reach the upper range of our guidance. Looking one step deeper, we see this significant uptake in order intake and backlog. So it's definitely a record order backlog for Secunet up by 30% and standing in the first half year at $360.8 million, which for me is always the most important indicator as order intake and order backlog are really showing the revenues for the future. and underpinning the continuous growth trajectory that we are looking at for Secunet. So we have a really solid foundation of reaching our targets for 2026 and also substantial parts of this order intake already reach into 2027 and the following years. At the same time, we have increased our workforce and expanded specifically into the key areas of development whether it's AI functionalities, AI testing and cloud capabilities and obviously enhancing our technological expertise in these specific areas. Yet we are also looking at AI functionality to continuously grow revenue at an underproportional growth of workforce and with that costs. We are very strongly investing our resources and time into creating strong partnerships. This is one advancement for Secunet as we are really landing inside the entire hardware and software AI IT ecosystem, where co-creation and co-building of solutions and stacks that are supplied or that are served by various players is absolute key in remaining successful and especially in scaling beyond local, beyond regional, beyond German markets. So for this we are investing a lot of time and energy to create partnerships with great companies out there to offer even better holistic solutions to our customers. So beyond strategy, we are happy to specifically announce for this year a number of partnerships that continue growing. We mentioned some of them during the annual shareholder meeting, yet I want to underline again the momentum that we're creating in these partnerships which on the one hand for example with InnoSystek really allow for analytics at scale so German analytics and data analytics at scale in a sovereign manner. We are working heavily with HPE and NVIDIA to create sovereign ecosystems for running AI workloads in public official and in our core customers allowing public officials and public entities to really access the capability and power of AI while meeting regulation and remaining in the cyber and ecosystem. The latest partnership with Cloudflare is the same concept really allowing the use of state-of-the-art technology especially in terms of network encryption, network security, while maintaining the data privacy, the regulation in Germany and Europe and making sure that all and any data remains sovereign. So we're really trying to create the best of both worlds using state-of-the-art technology, making this available for our public customers and at the same time maintaining our promise of sovereignty alongside these new technologies. With DCO Intensia we are working on sovereign control on the edge, really intelligent filtering and data security at scale for solutions that are, for example, required for what you might understand and hear around the publications of the Cyberdom initiative and the like. And also with the telecom, we are offering a classified cloud on demand. So our security infrastructure is used by telecom to process and work with highly classified sensitive workloads. This is just a sense and feeling to give you a feeling of where the company is developing alongside the numbers. but this will be creating the future of technology in the entire stack and this will obviously then be also the foundation for further growth and the numbers we report here in the future and with this I'd love to bring you back to today's half-year report and hand over to my colleague Jessica Nospers who will look have a deeper look into the financials of the first half year 2026 thank you so much julian and good morning and a very warm welcome from my side to everyone

um let me take let me take you to the financials now first of all we're having a look um at group revenue and we can see that we you can see that we had a very good start to the year in q1 and that the dynamics increased furthermore in Q2. As Julian already mentioned, the top line for the first half here is up 19.2%. And when we are looking at the Q2 alone, the result is even more profitable and we have roughly 32% increase in revenue growth. We will see later in detail and this was particularly up to the public sector that drove this development and with the continued high order intake we saw the first six months we were very optimistic for a growing momentum also in the second year or a second half of the year i'm sorry looking at our ebit development and you can see a similar seasonal pattern over the year We typically start very slow into the year, but there's always an exception to this rule. Last year, for example, Q1 was a little special when it was already positive in the first three months of the year as a result of some orders that were slipping from 24 to 25. This year, we have a more normal or more regular seasonal pattern. Again, starting with a slightly negative operational result, but as usual, it depends very much on how many orders we execute in the first quarter, while fixed costs are mainly fixed. Overall, EBIT increased by 20.4% in the first six months and more than doubled quarter by quarter. When we are having a look at the growth or the development by sector, we can see, as I indicated earlier, that the public sector took over the majority of the growth momentum and stood out, increasing almost 30%, and in Q2 it was more than 40% revenue growth. Mostly, the growth is driven by a defense in space, which recorded a revenue growth in a mid-double-digit percentage range. But also, Homeland Security Division showed a very similar dynamic growth, nearly doubling the revenue if you compare it to the same period in the previous year. Business with public authorities also increased significantly, which is quite encouraging also for the second half, since this customer group is more year-end driven when it comes to placing orders. the business sector on the other hand is down 47 in the first six months this development was already visible in q1 the segment is facing overall weaker demand from healthcare sector but also in some industrial sectors we are fundamentally reviewing and realigning the product portfolio of this segment with a stronger focus on recurring revenue and this will initially lead to weaker revenue and earnings performance during the transition phase but we are very confident that in the future we will see an uptick again coming to a favorable development in also the international sector and by geography you can see that germany had a good growth as usual, but also internationally, we see a very favorable growth development in the first half year of 2026, compared to 25 and even more quarter over quarter. Main reason for the increase in the first six months was European deals or business within europe with the eu but also um within smaller countries and in europe i think that the the consistency that we showed and the confidence that we and the trust that we build up with the customers uh starts paying out the cost development as you can see on on this page is showing the profitability in EBIT Express before. We have a growth by 20.4% in EBIT and 15.5% in EBITDA. You can also see that we had quite an uptick in the gene A development, which was due to, first of all, quite a low base, let's say, in the past year. So, G&A costs are historically rather at the low end in Sikonet, but we increased it, first of all, ramping up our FTE base for the transformation, but also for further growth to expand also our skill set. And in addition, the position is affected by some consulting projects aimed at improving our organizational excellence. After all, EBIT margins after six months are in line with the previous year, but also show nice improvement in Q2, and also net income was up roughly 17%. When it comes to cash flow, you will see that we made quite some use of the cash that we had collected in the past year, but there is no need to worry. You can see that a higher portion of the negative free cash flow comes from a change in working capital. And this was a decision that we made in order to be able to serve our customers in these difficult times. A main reason for the change in working capital, as you see it here, is an increase in inventory. And this is related to this, let's say, a little bit crazy market of storage media. Typically, we have fixed prices that we negotiate with our suppliers once a year. Due to the storage media crisis, though, our suppliers could not keep up to the prices. And this change would have affected our workstation hardware prices quite negatively. So our suppliers informed us in time and gave us the opportunity to place a so-called end-of-price order, which we deliberately did. This will secure attractive prices for our customers, and most of this additional inventory is expected to be sold off until the end of year. And this expectation is clearly supported by the high-order intake that we already talked about. And as a result, our cash position at the end of the period stood at roughly 7 million, but is expected certainly to increase again in the near futures as deliveries increase and we can sell off the stock. With this being said, I would like to hand over again to Julian for some comments in our outlook and some final remarks. Thank you for your attention.

Thanks so much Jessica and especially this last point is obviously the foundation and the basis for our decision to specify the outlook because the last point really enables us to guarantee and secure to an extent the ability to deliver in 2026. So therefore we are specifying our revenue outlook on the higher end of the range. range, so around 500 million and confirming our EBITDA and EBIT ranges as outlined before. These are narrow ranges, so we are confirming them for today. In summary and most importantly, we see the order income and top line to really continue growing with high momentum and a lot of clarity, a lot of more clarity, I would say, coming into the pipeline of the next years especially in defense spending this is different than probably one year ago when you heard us talking about unclear a lot of money in the market but unclear direction so we see much more clarity we see much more direction that allows us to build our planning and business upon we see very strong dynamics in the public sector and i also want to underline here that we are making progress with our active approach to new regional markets. So similar product ranges, similar customers but more on a regional than on a state level and as well as Jessica pointed out before substantial progress in our international customer base. Our profits are significantly improving in line with the sales while we are able as also Jessica outlined to fund our own transformation and get ready for the next phase of growth and get the team ready for the next phases in our market. We see progress in our core technology as well as in our most so that if you remember the three fields are our securing and bringing our core technology in the future. We see substantial progress driving cloud and AI offerings in order to help our clients also to apply secure sovereign cloud solutions and even use AI functionality on top of these and the third part which is not listed here is the internationalization where we also see progress so a lot of movement in 2026 with this we confirm the outlook with the revenue at the at the upper range as I said and we are really looking forward to the second half of 2026 as it's going to be a super exciting year. You know that Secunet is quite strong in the last quarter. We have been getting ready for this with the additional inventory and a lot of negotiations with our suppliers partners and especially customers which are always at our heart when we think of technology and when we make sure that we can serve them as we are very much aware of our responsibility in this market, really securing the freedom to operate for really key critical infrastructures and institutions throughout Germany and Europe.

And with this I would love to thank you for your patience and attention throughout the presentation and obviously with this open the floor for any questions that you might have yes thank you very much for the presentation and now dear participants you are welcome to ask your question if you have any so please signal this with the raise your hand button if you're dialed in by phone please press star 9 on your telephone keypad and additionally if you are not able to speak freely you're welcome to use the chat but we prefer the audio line and andreas

wolf is the first participant and you should be able to unmute yourself and toggle the microphone and ask your question please mr wolf we still can't hear you have to unmute you good morning can you hear me yes now it's working um sorry uh congratulations on the quarter a couple of questions from my side so the first one is on the hardware price inflation um what would be the impact of a prolonged hardware price inflation on prices agreed with customers if you look into the next year would you be able to agree new prices with clients or do we have framework contracts that kind of uh fix the the prices with clients so So, that's my first question. The second is on the order intake. How do you expect incoming orders to develop over the course of this year, i.e. in H2? Should we expect the typical seasonality with a stronger H2 than H1, or is this year likely to be a special one? And then on the order book, are all orders in the order book binding or does the order book also include non-binding orders where clients might not order or pull their order if they consider prices too high given the supply chain constraints? Thank you.

I'm happy to take those questions. First of all, to the hardware prices. Usually, we have the possibility to increase prices with our customers, full stop. Nevertheless, this does not change the budget for our customers. We clearly need to say that when they, let's say, have a budget of 100, it is not going to increase in line with inflation. So what we are always trying to achieve is to find a good solution with our customers. and very often communicate very clearly with them what the issues might be in a certain situation, particularly now driven by the hardware inflation. And so we usually work then on agreements where the price increase, where there is a price increase, but nevertheless we keep the price increase for a certain time even if the original input price is reduced again to cover for, let's say, what we bring in advance. So we are very open, particularly in these crazy situations where daily broker prices really make the market. So we're very open. As a little summary, yes, we can negotiate price increases. We do it, but we also try to keep our prices for the customer attractive and find solutions that are favorable for both parties. When it comes to order income development over the next quarters, we expect to see the same seasonality that we usually see. So we expect also a very good level of order income during the next few months and quarters. certainly times have changed a little bit since let's say two or three years before which you can see that defense revenues are increasing and we expect also an ongoing favorable order income development when it comes to defense but also when it comes to all our other divisions when it comes to order income if they are binding yes order income is always binding it is always based on confirmed orders it is it has rarely happened that somebody cancels an order sometimes the specifications of an order are changed or the setup of the order but it's very rare that that orders are cancelled usually also we have a binding contract but if our customers will ask us if we can cancel an order we always try to find a solution that is favorable for both parties but as i said rarely happened before thank you is that answering okay thank you perfect okay so we move to the next participant mr christian course you should be able to unmute yourself

and turn the microphone and place your question please mr course i hope you can hear me yes yeah perfect yes first of all thank you jessica for the clarification on cash flow and the hardware presentation um i have three questions remaining uh first of all uh coming to border patrol there is a new european entry exit system which produced a lot of yeah um press media attention about long waiting queues at the airports etc etc according to my understanding um your solution is a success story um but maybe can you elaborate uh or can you elaborate um to what extent the current problem or yeah the current problem are these linked to your technology or or what is the what is the cause and the root of the of the problem here secondly um in germany um there are plans for digital wallet to develop a sovereign german stack so to what extent is secunet involved in these projects and is there um yeah future business potential to um to that can materialize And would this also not allow Secunet for a stronger penetration of municipalities? I mean, so far, I think your revenues are not exclusively, but to a large extent, linked to federal institutions. So is there a possibility to go for a stronger penetration of municipalities and local authorities? and lastly you mentioned the cloud ecosystem you have put yeah this system in motion and do you notice already also more customer interest or have you even been able to yeah to achieve any commercial progress in this particular field of business thank you just then one little question i didn't hear the third one an ecosystem for what i meant yeah you mentioned that you put the cloud ecosystem in motion yeah and so the question so my question was whether you have been able also already uh to improve um your cloud business operationally whether you have seen already yeah more customer interest or even better results on the cloud business because i think so far your cloud solution is still a bit underutilized and there is a promise of yeah um better financials in case you get a higher utilization rate absolutely so um i'm i'm happy to take uh the first question julian do you want to do it okay um so um when the entry exit system i'm very happy about this question because i can now state that there is zero problems with our solutions.

I'm really very happy because I know that I talked to Marco Breitenstein who is the responsible guy for this division and who does it with a very calm hand and very long experience and a very good knowledge of the sector and when we talked he presented to me the statistics of how things are running throughout Europe with the EES and all our systems were green and there were a lot of orange and red flags but none of the origin red flags were related to us so um that's uh what i'm very very happy um to to say then maybe i jump directly to to the question of municipalities um yes we have a lot of federal state business but we are now moving very much to um also let's say um the the the state level and also working our way through to municipalities. We plan to expand our market there, but it will take some time because the municipalities have a variety of different IT systems and different applications.

And we are planning to do this together with one, two, three partners to be able to provide a proper service and product portfolio also on municipal level okay then um to the digital wallet julian do you want to take over for this for the cloud okay yeah happy happy to do so um maybe i can add one thing on the municipality level which um all the jessica outlined it's a focus area yet in the current order income that you see very favorable in the first half year there is for instance one very big order of one big, how do you say, federal, state level order. So we're seeing this pick up, yet as also Jessica said, we are working on building pipeline, we're working on building budgets for large scale rollouts. For us it's super important to supply the entire ecosystem, not one laptop or one desktop workstation, but a whole ecosystem and network. On your question around the EUID wallet, which is strongly driven also by the German government and by the partnership, I can say yes, we are part of this and doing a lot of work on also advisory and let's say forming the tech stack of Germany. It is quite an open approach and project where we are deeply involved, obviously. So far the awards or the tenders that have been given out are for larger scales, but it's usually not, we had this discussion with Order Backlog before, this is not binding orders for a certain scope. this is usually frame contracts for developing parts of the system and wherever it's applicable of course we are participating. None has been awarded in an area that is really an area of interest for Secunet. So we are still in the phase of really giving our input and and let's say the creating the technology stack and approach. So we see this bringing a lot of potential in the um digitalization of government yet it's still um it's still a way to go until it's really fully functional so we are strongly involved and we hope to to create some some more business out of that on the last part in the cloud infrastructure i think you are specifically operationally operation we're making substantial progress in um the pro in the way we approach the tech stack and the market. So the next 12 months will be very strong focus on how we approach the market in the specifically defined verticals that we are approaching. So we are narrowing the focus and really driving heavily on the market in order to help create demand. We also see or to help create understanding I'd rather say for why it's needed and what is needed And we also saw quite an uppick in the orders we have, so physically in the cloud infrastructures that we are selling to our clients, yet the clients themselves are still in the progress of shifting, in simple words, shifting data packages from on-prem service into cloud service, even when the cloud is available. because it's an entire change in transformation management also on the client side for the mindset of the customers to really move the data packages from what they consider secure on-prem servers in the basement to the cloud even when it's already there and that's that's different so you don't see backlog from the cloud to that extent in our backlog because it is mainly it is mainly demand driven or demand initiated. So I hope that answers the questions and underlines that we are fully focused on these topics.

Very helpful. Thank you.

Thank you, Mr. Cross, for your questions. And we head back to Mr. Wolf with a follow-up. You unmuted yourself. Please place your question.

Yes, thank you. I have a question regarding the business segment looking at the revenue development here is it fair to assume that the year-on-year decline is mainly due to lower connector revenues and if we look beyond this year what would need to happen for us to see revenue growth in this segment thank you thank you so basically it is partially or largely reduction in connector growth because the hardware model is no longer accepted by Gematik.

I think it's running out by the end of 27. So what is certainly not helping the push to recurring revenues in this segment is the fact that the connector hardware's life was prolonged to a certain amount of time. So, a lot of customers are kind of being sticky or sticking to this old solution and a little bit hesitant to change to the as-a-service model. That is certainly one portion, but the other portion is also the general weakness of the economy and the certain reluctance that we can see to heavily invest in cybersecurity, also in according with the regulations of NIS. but still there needs to be some money for investment and there's sometimes lacking thank you okay thank you very much and we have by now no further questions I'll wait a few more moments if there's another participant raising his or her hand

that is not the case by now so we come to the end of today's earnings call Thank you very much to all the participants for your interest in SECONet Security Networks AG. A big thank you to Julian Sievert and Jessica Nospos for the presentation and the time you took to answer the questions to all the participants.

Should any further questions arise at a later date, please feel free to contact Director Investor Relations Christoph Marx. and from my side i wish you all a very successful day and handing over to julian sievert once again for some closing remarks thank you and bye bye likewise thank you very much for the for the moderation and especially for the interest to all of the participants we i think you see that we are not only operating in a very favorable market environment but also we are we are really changing ourselves and while maintaining the core and the responsibility we have along our customers and helping them to really move into the future which sometimes takes a while as we see in cloud and ai on the other hand then it comes at a very strong pace so we are super confident for the next years and the foundation we are creating with segunet to build upon until the end of this decade so thank you very much for your interest for your support and we remain open for your questions at any time and see you latest um in november or before with christoph marx who is always available for any additional questions thanks a lot have a good have a good rest of the day.

Thank you. Bye-bye.