3U HOLDING AG: First quarter 2022 at 3U: Strong growth, solid earnings

Marburg (pta006/11.05.2022/07:00 UTC+2)

• All three segments with partly significant revenue growth
• Earnings development in line with expectations
• Forecast for the 2022 financial year confirmed

In line with expectations, consolidated revenue at 3U HOLDING AG (ISIN DE0005167902) rose sharply in the first quarter of 2022 (Q1 2022) compared with the first quarter of 2021 (Q1 2021). Consolidated revenue came in at EUR 16.84 million, up 19.4% in a year-on-year comparison (Q1 2021: EUR 14.10 million). All three segments contributed to raising revenue.

Despite the rapid increase in personnel numbers in the ITC segment and higher other operating expenses, the Group's EBITDA margin matched the year-earlier level. Other operating income of EUR 2.21 million (Q1 2021: EUR 2.27 million), largely generated from selling office space in the InnoHubs building complex in Würzburg, also contributed to this result. The Group's cost of materials came in at EUR 8.11 million in the first quarter of 2022, reflecting an increase of 3.7 % year on year (Q1 2021: EUR 7.82 million). Compared with higher consolidated revenue, the cost of materials ratio (cost of materials as a percentage of revenue) declined from 55.5 % in the first quarter of 2021 to 48.2 % in the period under review.

As a result of the greater numbers of personnel in Cloud Computing, both new staff hired and the additional employees in the subsidiaries acquired in 2021, the Group's personnel expenses rose by EUR 1.86 million (59.1 %) to currently EUR 5.00 million (Q1 2021: EUR 3.14 million). Despite the sharp increase in revenue, the personnel expenses ratio (personnel expenses as percentage of revenue) posted 29.7 % which significantly exceeds that of the year-earlier quarter (Q1 2021: 22.3 %).

The share of other operating expenses in revenue came in at 14.9 %, reflecting a decline compared with previous year's figure (Q1 2021: 15.5 %).

Earnings before interest, taxes, depreciation and amortisation (EBITDA) therefore rose by 12.4 % to EUR 3.77 million in the first quarter of the financial year 2022 (Q1 2021: EUR 3.35 million). Along with the positive contributions to earnings from the Renewable Energies segment, the increase is also due to proceeds from selling office space in the new building in Würzburg. The EBITDA margin (EBITDA in relation to revenue) nevertheless declined slightly due to higher revenue and stood at 22.4 % (Q1 2021: 23.8 %).

Adjusted for expenses of EUR 0.26 million to take account of the currently shelved preparations for an initial public offering and for M&A projects in the Cloud Computing business, (adjusted) EBITDA would have amounted to EUR 4.02 million, reflecting an (adjusted) EBITDA margin of 23.9 %.

Depreciation and amortisation totalled EUR 1.21 million in the first quarter of 2022 (Q1 2021: EUR 0.99 million). The increase is attributable to depreciation and amortization from the purchase price allocation pertaining to the acquisition of ITscope GmbH. Tax expenses of EUR 0.73 million were incurred in the first quarter of 2022 (Q1 2021: EUR 0.28 million).

Consequently, the proportion of the consolidated result attributable to the shareholders of the parent company dropped to EUR 1.39 million in the first quarter of the current financial year (Q1 2021: EUR 1.82 million). Earnings per share stood at EUR 0.04 (basic and diluted).

Segment results

The ITC segment reported strong revenue growth again. Segment revenue of EUR 7.06 million was generated in the first quarter of 2022, marking growth of 29.2 % compared with the first three months of 2021 when revenue was stood at EUR 5.46 million.

The Cloud Computing business in the weclapp SE subgroup remains the key driver of expansion within the Group and in the ITC segment. Revenue came in at EUR 4.00 million in the first three months of 2022 at a 67.4 % growth rate. At EUR 1.20 million, ITscope GmbH's revenue also fully meets expectations. Revenue of weclapp SE at single company level grew strongly by 19.2 % climbing to EUR 2.85 million year on year (Q1 2021: EUR 2.39 million). Since 2021, management capacities have extensively been tied up in preparing mergers and acquisitions as well as the potential IPO. The ongoing refocusing of sales aims at more intensive market penetration, and a phase of accelerated growth. The associated massive increase in new personnel will also lead to a temporary denting effect on margins. As already explained in the management report on the consolidated financial statements, the Management Board anticipates strong growth in the financial year 2022. Full-year revenue growth in the subgroup is forecast at around 60% – to between EUR 18.0 million and EUR 20.0 million (2021 revenue growth was 63.5 %).

At EUR 2.88 million, the Telecommunication business line generated sales revenue at the year-earlier level in line with expectations (Q1 2021: EUR 2.86 million). The slight decline in Voice Retail, and the lower volume of services delivered to companies associated with the Group was offset by growth in data centre services. Management intends to continue to pursue the underlying strategy of compensating the declines anticipated in Voice Retail by generating growth in other parts of the Group's operations.

Despite higher contribution by Telecommunication of 30.1 %, segment EBITDA dropped by a disproportionate 34.9 % to EUR 1.00 million (Q1 2021: EUR 1.54 million) due to the sharp increase in Cloud Computing costs in the first quarter of the financial year 2022. The ITC segment's EBITDA margin (EBITDA as a percentage of revenue) therefore came in at 14.2 % (Q1 2021: 28.2 %).

Adjusted for non-recurrent expenses of EUR 0.11 million for preparations for a possible IPO of subsidiary weclapp which have now been suspended, as well as for M&A projects, (adjusted) segment EBITDA would have amounted to EUR 1.11 million. Moreover, with regard to an imminent IPO, a share option programme for the employees in the weclapp SE subgroup was launched. Keeping this programme running increases non-cash relevant personnel expenses by around EUR 0.17 million per quarter. The counter entry is reflected as an increase in capital reserve. Net of this expense, adjusted segment EBITDA would have amounted to EUR 1.26 million, corresponding to an adjusted EBITDA margin of 17.8 %.

The first quarter of 2022 was the sunniest Q1 ever since the Adelebsen solar power plant went online. For this reason, and thanks to the plentiful supply of wind, revenue generated by the Renewable Energies segment increased by 62.6 % to EUR 2.42 million (segment revenue Q1 2021: EUR 1.48 million). The favourable conditions of newly concluded electricity supply contracts also contributed to this strong growth. As a result, segment EBITDA also improved substantially in a year-on-year comparison and, at EUR 2.02 million, marked an increase of 89.5 % (Q1 2021: EUR 1.07 million). With a lower level of depreciation and amortisation, a slightly improved financial result, and despite higher taxes, the segment result comes in at EUR 1.10 million (Q1 2021: EUR 0.16 million).

The SHAC segment's revenue climbed by an overall 2.4 % to EUR 7.55 million (Q1 2021: 7.37 million). Subsidiary Selfio's e-commerce business is gradually returning to a growth trajectory. Although revenue of EUR 6.01 million in this segment dropped 3.6 % below that of the first quarter of 2021 (EUR 6.23 million), it exceeded the figure posted in the fourth quarter of 2021 by 6.6 % (Q4 EUR 5.64 million). Supply bottlenecks which had already hampered e-commerce in the financial year 2021 still persist and will likely be exacerbated by the war in Ukraine. In this scenario as well, all efforts are being channelled into satisfying customer wishes to the greatest extent possible, thereby reinforcing the company's market position. Given the current trend towards reducing emissions and the use of fossil fuels, our extensive know-how, in heating systems with low flow temperatures, for instance, may open up additional opportunities.

The increase in procurement prices across the industry were not able to be passed on in full to the customer. This situation is evident in the cost of materials ratio rising to 81.9 % in the first quarter of 2022 (Q1 2021: 79.1 %). With costs otherwise largely steady, segment EBITDA remained in marginally negative territory. The segment result dropped to EUR –0.41 million (Q1 2021: EUR –0.03 million).

Revenue of EUR 0.48 million, from management services in particular, was reported under Other Activities in the first quarter of 2022 (Q1 2021: EUR 0.38 million). The holding's personnel expenses of EUR 0.75 million remained at the year-earlier level (Q1 2021: EUR 0.75 million). Other operating expenses of EUR 0.55 million declined significantly (Q1 2021: EUR 0.87 million). Other operating income of EUR 1.88 million resulted from the sale of office space in the InnoHubs building project in accordance with progress made in construction work, bringing Other Activities' EBITDA to EUR 1.06 million (Q1 2021: EUR 0.73 million).

Net assets and financial position

Total assets had grown to EUR 130.86 million as of 31 March 2022 (31 December 2021: EUR 119.05 million). The balance sheet extension is essentially due to the increase in property, plant and equipment and liquid funds on the asset side and the increase in non-current financial liabilities and equity on the liabilities side. The other current and non-current items in the statement of financial position as of 31 March 2022 largely corresponded to the level posted on 31 December 2021.

The changes are essentially determined by progress made in the InnoHubs building project in Würzburg. As progress is made in building the office space earmarked for future leasing, this results in an increase in property, plant and equipment. As of 31 March 2022, property, plant and equipment totalled EUR 38.39 million, reflecting an increase of EUR 4.84 million compared with 31 December 2021 when this figure stood at EUR 33.55 million. In a two-account model which accords with the rules and regulations set out under the German Property Broker and Developer Ordinance (MaBV), the buyers of office space remit the payments agreed to a dedicated property developer account. The developer makes payment to the general contractor from a loan account in accordance with the progress of construction work. The loan amount taken out for this purpose rose by EUR 6.78 million over the course of the first quarter, which essentially contributed to raising the non-current financial liabilities to EUR 37.11 million as of 31 March 2022 (31 December 2021: EUR 29.26 million). Against this, cash and cash equivalents in the consolidated statement of financial position were valued at EUR 22.05 million (31 December 2021: EUR 12.72 million). The difference compared with cash and cash equivalents of EUR 9.95 million disclosed in the cash flow statement is primarily explained by the balance on the aforementioned developer account.

Cash inflow from operating activities stood at EUR 7.68 million, thereby considerably exceeding the year-earlier figure (Q1 2021: cash inflow of EUR 1.51 million). Further drawdowns on the loan to finance the InnoHubs building project in Würzburg generated a cash inflow from financing activities of EUR 7.53 million (Q1 2021: cash outflow from financing activities of EUR 0.75 million). The cash outflow from investing activities of EUR 5.87 million also mainly relates to the InnoHubs building project. In the first quarter of 2021, the high cash inflow from investing activities (Q1 2021: EUR 3.36 million) was principally due to the partial sale of the Adelebsen property. The positive cash flow of EUR 9.33 million (Q1 2021: EUR 4.11 million) includes incoming payments in an amount of EUR 7.01 million on the aforementioned blocked account. Free cash flow advanced to EUR 1.81 million in the first three months of the financial year (Q1 2021: EUR 4.86 million).

The change in the key financials as of 31 March 2022 is also principally attributable to the activities in Würzburg: The debt-to-equity ratio climbed to 104.5 % (31 December 2021: 91.7 %). By contrast, net liabilities (cash and cash equivalents minus financial liabilities) had decreased slightly to EUR 16.71 million (31 December 2021: EUR 18.2 million).

Equity was reported at EUR 56.77 million mainly thanks to the consolidated result (31 December 2021 EUR 55.25 million). Owing to the balance sheet extension, however, the equity ratio of 48.9 % was lower than on 31 December 2021 when it stood at 52.2 %.

Outlook

The Management Board confirmed the guidance issued in March and anticipates a double-digit increase in consolidated revenue, which will derive support from the strong organic growth of the operating units in the financial year 2022. Sales revenue in 2022 is expected to settle within a range of between EUR 65 million and EUR 70 million. Moreover, earnings in the single-digit million range from the disposal of assets have been incorporated into planning. In view of the measures introduced to strengthen profitability, on the one hand, and the higher level of expenses for expanding cloud computing, on the other, the Management Board anticipates earnings before interest, taxes, depreciation and amortisation of EUR 10 million to EUR 12 million. Profit of the 3U Group is therefore expected in a range of between EUR 2 million and EUR 4 million.

The actual performance of business may be higher or lower than forecast here due to the acquisition of companies by 3U HOLDING AG or other Group companies in the cloud computing business or from selling operating units of the Group. The resulting effects can only be planned for to limited extent, however.

Predicting with any degree of certainty to what extent the war in Ukraine or more stringent economic restrictions imposed to combat the COVID-19 pandemic later this year will impact on business activities is not possible.

Quarterly announcement

The quarterly announcement on the first quarter of the 2022 financial year will be published today, 11 May 2022. It can be downloaded from the company's website (www.3U.net) under the "Investor Relations/publications" heading.

For further information:
Dr. Joachim Fleïng
Investor Relations
3U HOLDING AG
Tel.: +49 (0)6421 999-1200
Fax.: +49 (0)6421 999-1222
email: IR@3U.net

About 3U:

3U HOLDING AG www.3U.net) was founded in 1997 and has its headquarters in Marburg, Germany. It is the operating management and investment holding company at the head of the 3U Group. It acquires, operates and sells companies in the three segments of Information and Telecommunications Technology (ITC), Renewable Energies (EE) and Sanitary, Heating and Air Conditioning Technology (SHAC). The 3U Group has successful and profitable business models based on megatrends in all three segments. It continues to expand its business activities dynamically, particularly in its strongest growth areas of cloud computing and e-commerce, in which it is striving to achieve leading positions in the market.
3U HOLDING AG shares are traded on XETRA, Tradegate and on German regional stock exchanges (ISIN: DE0005167902; stock exchange symbol: UUU).

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Emitter:	3U HOLDING AG Frauenbergstraße 31-33 35039 Marburg Germany
Contact Person:	Dr. Joachim Fleing
Phone:	+49 6421 999-1200
E-Mail:	IR@3U.net
Website:	www.3u.net
ISIN(s):	DE0005167902 (Share)
Stock Exchange(s):	Regulated Market in Frankfurt; Free Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate