Live-Webinar der Frequentis AG mit CEO Norbert Haslacher - 14. November 2024

Yes, thank you. My name is Norbert Haslacher, I am the CEO of the Frequentis Group. Perhaps we'll go straight to the next slide: who is Frequentis? Frequentis is a listed family company, listed in Frankfurt and Vienna. We have specialized in safety-critical control centers. I'll click further. Yes, we have specialized in safety-critical control centers. That means our customers are primarily public authorities or authority-related organizations that operate national safety-critical infrastructure. This includes air traffic management, civil aviation, typically air traffic control centers, air navigation services, but also airports or space agencies. Secondly, the defense sector, primarily the air force, army, but also navy. And the second area is public safety, which involves blue-light organizations, police, fire brigade, rescue, but also railway control centers, as well as in the maritime area, coast guards or search and rescue services at sea. On the next slide you can see what we are very proud of: we are world market leaders in some of our products. We have built up 45 subsidiaries over the last 30 years. There are very few countries where Frequentis does not have a system already in use in the safety-critical area. We have about 500 government customers or authority-related organization parts in 150 countries worldwide. And in large regions where we have a strategic interest for our growth, we have also founded our own subsidiaries to serve the markets locally. I would like to mention specifically the USA, but also Brazil or Australia, as well as China, UK, Nordics and Baltics are to be mentioned, where we have built local value chains over the past years.

On the next slide you can see the development since our IPO in 2019. I think we can be quite satisfied with the revenue development, the order intake development, we have also increased the EBIT margin, and we were able to expand our employee base by 400 colleagues worldwide. Briefly, we have our headquarters in Vienna, with about 1,000 employees out of about 2,400 worldwide. The other 1,400 colleagues are distributed across the globe. We employ about 50 nationalities in the Frequentis Group and 36 nationalities at the headquarters in Vienna, so we are a very international, multicultural organization within this family business.

On the next slide, I would like to give an impression of the kinds of projects Frequentis wins. First, this year in February/March, but also last year in November, we won two major orders from the US air navigation service. The budgets for these two contracts from the customer are about $700 million, awarded to Frequentis to convert the complete air traffic control network to IP. This is a great project for us, and I want to say upfront that even a Trump election will not change anything. We have been in the USA for 25 years and have experienced several presidents and different parties in leadership positions. That is irrelevant for us because we have national value creation in the USA and also produce in the USA for the US market. This order means a rollout of six to seven years and then probably 10 to 15 years of maintenance for the US air navigation service network. Another noteworthy project, for example in Germany, we received the order for the renewal of the military radar data network. We have 22 Bundeswehr sites that we are upgrading, and as part of the special fund of the German federal government, we received a larger order to renew the sensor network of the entire German radar infrastructure. Another typical project for us is that we are now selling our software solution LiveX, which is the communication platform for safety-critical blue-light organizations, also in the USA through sales channels. In the USA, the customer structure is such that every sheriff can buy his own communication system, and we decided to go through a partner to establish a pure software business in the USA for the blue-light sector, leaving the sales and implementation of this software to our partner in the USA. Since we didn't want to invest in such a sales network from the start, it's a very interesting business model that we have implemented since the beginning of this year in the USA for the public safety sector.

On the next slide you can see what we are doing in Germany. Germany is a very important market for us. In principle, there is no country where we do more than 10% of our order intake, so these cluster risks usually do not exist. They are well distributed across the globe, also strongly dependent on customer budget cycles. Sometimes the cycle is stronger in Australia for investments, when it weakens, it becomes stronger in the USA or Europe, so we can balance this quite well globally. But Germany is a very important market for us. We are active in all five business segments. We have been working with the German Bundeswehr for many years in large projects, especially since the Ukraine crisis in even larger projects. Also with the German air navigation service, we have equipped 100 locations. We have delivered 1,800 BOS (blue-light) workplaces in, I think, 9 federal states. Deutsche Bahn is equipped with our solutions, and the maritime solutions in the port of Hamburg and the security center in Cuxhaven have also been delivered by Frequentis in recent years.

On the next slide, briefly the half-year figures. We had very good order intake, good growth. On the next slide you will see that we have been characterized by growth in recent years because our two megatrends, security and mobility, both favor investments in authorities that manage this national necessary infrastructure. And I believe the security situation in the world has worsened rather than improved in the last two years, so investments in security are a very important factor for our growth. The second is mobility. I always like to point out that even if we operate with flight shaming in Europe in some segments, from a global perspective it is irrelevant. A report just came out that air traffic will double in the next few years globally. In Asia, significant infrastructure projects for the construction of airports and air traffic control centers are being carried out. The USA is growing in terms of air traffic, Africa is also growing. So from a global perspective, air traffic and mobility is a trend that is absolutely intact and will continue for the next 10 to 15 years. This can also be proven by looking at the order books of Boeing and Airbus; they are building airplanes for the next 10 to 15 years that will generate significantly more air traffic than in the last 15 years. What is also important here: I want to explicitly point out that we have a public sector business, which is a project business, a seasonal business. We actually make 60-70% of our revenue in the second half-year, and we also make all our profit there. This has looked the same for the last 15 years. The first half-year is always or mostly negative in EBIT because we collect the costs for the projects, and when the projects are completed in the second half-year, we generate our total annual profit, mostly in Q4 because the authorities want to close the projects. Equity ratio around 40% every year, and Frequentis has not had a single year with a negative result in the last 20 years. So we always have a good net cash position at year-end, usually between 80 and 100 million euros. At the half-year, it is around 65 million euros.

Going to the next slide, here you see the order intake development. COVID cost us some growth in order intake, but we saw, and we will see later in the order backlog, that it has continuously increased because during Corona we could not even realize the order intake we achieved, as we were not allowed to fly to our customers. We are of course dependent on being able to visit our customers by plane and, if we do not have our own subsidiaries or partner organizations on site, to carry out and install the projects ourselves. Nevertheless, after Corona, growth quickly returned, and we were also able to show a significant increase in order intake in the first half of this year compared to the first half of 2023.

On the next slide you see the order backlog development. It has been rising continuously through Corona, and we are very proud that we have a nice order cushion for the coming years. I want to point out again: we only show contracts in the order backlog that are absolutely committed and must be delivered by us. So here we do not show customer budgets, but concrete contract values in our order backlog.

The revenue development has also been very positive if you look at the last five years since the IPO. We have grown every year, and again this year, even though many industries are currently struggling and having problems with their growth. That does not apply to us because we are in a very stable customer environment where national funds are provided for safety-critical infrastructures, which cannot be stopped or rationalized even in difficult macroeconomic times. They must always run. Air traffic control must run, military must function, blue-light organizations must function. They are essentially independent of macroeconomic developments, unlike many business models. On the next page, here you see our EBIT margin development. We started before the IPO at about 5.2-5.4%, then came Corona. The jump in EBIT development was primarily due to the fact that we were not allowed to fly and could not attend trade fairs, so it all went into costs for customer interactions and trade fair budgets and flight travel. That was also unhealthy; we want to be with our customers and exhibit our innovations at international trade fairs. So after Corona, we came back to a level that has continued to support continuous margin growth since the IPO. 5.2-5.4% if you exclude Corona, now on average about 6.3%. The public safety and transport area has developed particularly well. I want to explain one thing: when I started 10 years ago in the company, the task was to transform the very hardware-centric, proprietary portfolio of Frequentis towards software, towards the cloud, towards virtualization, also towards software-as-a-service models. We started with public safety around 2015. We actually replaced our own products, which we used to build ourselves with microelectronic component placement systems in the basement, with software. In public safety and transport, we are now very advanced with the transformation towards software-centric business models and software-centric portfolio. I think the margin development can be seen very well. We have on average about 12-13% EBIT in that software-centric business model, but the preceding years required many millions of investments that we paid from our EBIT. If you look at our balance sheet, you will not find any capitalization of software products because Frequentis, as a family company, pays for software development from EBIT. If we cannot afford it, we cannot implement it.

In air traffic management, we have now begun to transform our portfolio as well. That means our core products will be converted from the microelectronic component placement systems to software, developed cloud-native, using container technologies, so that in three to four years we will have replaced our hardware-centric solutions with software.

On the next slide, briefly the growth compared to the previous year. Here it is clear: Europe still plays a major role for us, the Americas play an increasingly larger role, but Asia is also growing. And if you look, we did not grow disproportionately in one region; we grew in all regions. Australia was a bit behind due to budget cycles, but Asia, the Americas, and Europe grew very decently in percentage terms compared to the first half of 2023. What I also want to say: we built a market model analysis at the time of the IPO. You cannot buy studies that explain the exact market potential for our safety-critical control center market. There is relatively little literature available in the military area. The ATM area is very well analyzed, but the public safety area, maritime, and public transport are very asset-intensive markets where it is about trains, tracks, ships, ports. The control center is relatively difficult to identify in terms of potential. So we built our own market model based on assumptions: per 100 km of railway line, I need so many workplaces in the control center, or based on ship traffic, so many operators along the coast. With this market model, we arrived at a total market for control centers worldwide in all segments of about 13 billion euros. We have now re-validated it this year; we are now at just under 14 billion euros, meaning the market is growing, and our assumptions from five years ago at the IPO were not bad. What is interesting for us is that we have a very large, stable worldwide customer base of 500 government customers, and with our current product portfolio we can address about 3.5 billion of these 13 billion. So our strategic direction is clear: we want to develop more and more products through R&D. We have about 14% R&D rate at Frequentis, half of which is paid by the customer, which is quite common in the public sector because they want to drive innovation, and the other half is paid from our EBIT because, as mentioned earlier, we do not capitalize R&D expenses but pay them from EBIT. And our strategic direction is to expand this 3.5 billion through M&A and R&D to make more and more of these 13 billion addressable for us. In my words, I always tell analysts: I don't need more customers because I have enough customers. 500 customers worldwide is a very good customer base. I want more products to sell more products to existing customers. You also have to understand the characteristics of our customers. They are authorities with safety-critical tasks. They don't try things out; they are very risk-averse and don't want to test things. They want stable solutions that run 100% or 99.999% to manage their infrastructures. And this industry is heavily based on trust and reputation, and Frequentis has been playing a significant role for over 75 years.

Yes, when you look at the next slide, there are also a few markets that are just emerging and are very interesting for us. For us, this is venture capital. We try things out in new business development. In the space area, drone area, new networks area. Everyone knows that in Europe, the TETRA digital radio networks are coming to an end. They have been in use for 20 years, the bandwidths are catastrophic. As a police officer or firefighter, I can only transmit one voice and send a text message. That is absolutely unacceptable for 2024. We have already had initial discussions with the relevant state secretaries in the ministries in recent months that Germany must also move towards broadband infrastructure to transmit mass data over terrestrial LTE/5G infrastructure securely into the control centers. Frequentis bought a startup a few years ago that can make terrestrial LTE/5G infrastructure available for safety-critical applications, end-to-end encrypted and prioritized. That means when something happens, blue-light forces get priority in the allocation of radio channels. I think this is a very important factor to provide the control centers with more information. This is not a German or European trend; it is a global trend. We have already positioned the first projects in Australia and also in the USA, where there is a large FirstNet program to make this technology available for blue-light organizations. Drones are also very exciting for us. I always say I am convinced that in 15 years, more drones will fly in the air than airplanes. I still believe that. The use cases are increasing every day, the areas of application are growing. Unfortunately, the regulator is still lagging behind. Europe is very slow in regulations. I hope this will accelerate. There are now initial drafts, but we are still far behind the Asians and Americans in Europe. But it is a global topic, and drones will play a major role in our airspace in the next 10 to 15 years.

The last part is the Digital Tower area. We have enabled, at the request of the German air navigation service, Saarbrücken to be the first airport in the world to be operated remotely from a desk in Leipzig. The controllers sit in Leipzig, 600 km away from Saarbrücken, and actually operate Saarbrücken airport. This is done remotely via sensors and optics, transmitted with safety-critical transmission tools. Analysts say that this market will grow by about 25 to 36% per year in the military and civilian sectors in the coming years. We are now seeing the first military requirements coming to us. Two years ago, we supplied the US Air Force with this German technology in a research project. Now we are in the process of having this solution certified as the sole supplier in the USA at the FAA TechCenter. A certification is planned by the US government for 2026.

Yes, the next slide. I think we have proven in the last few years, especially since the IPO, that we are growing faster than the market. The market growth was 4-5%, we have shown 8% per year growth in the last 5 years. As mentioned before, our industry and our customers are largely independent of macroeconomic trends. It is about security, about mobility, and that is anchored in the respective countries' organizations. Our growth drivers are absolutely intact. Finally, one slide: what are we focusing on now for 2024? We are, even today, six weeks before the end of the year, absolutely convinced that we will increase our order intake and our revenue in 2024 compared to 2023. We have had very good pipeline execution this year so far, so the contracts came as planned. We also expect some more contracts. For us, December is the most stressful time because the authorities want to let budgets flow out in the cameralistic system. This is a very important time for us to materialize these budgets into contracts. The EBIT margin is still as we announced at the beginning of the year; we expect around 6%. The reason for this margin, I want to point out again, was the high inflation in Austria over the last two years, which has thankfully decreased significantly. This translated into collective bargaining negotiations, which are part of the social partnership in Austria, with about 8% salary increases per year in the last two years, so 16% salary increases over the last two years. This phase is now over for us, thankfully, because currently inflation is around 4%, and we hope it does not come back to the levels we had two years ago. The order backlog of 621 million gives us a great starting position for 2025. We are currently in the planning process for 2025. I don't want to reveal too much, but we also have a very good pipeline for 2025 because, as I said, the two topics of security and mobility favor investments in national safety-critical infrastructures and drive them accordingly. I think, Mrs. Reuter, that was my last slide, and I hope I didn't take too much time.

Looking at development, it could become even more dynamic. Overall, good prospects. The statistics show the volume until 2030 and the revenue from drones, among others in the transport and storage sector, will increase strongly, where drones can take over inspection and maintenance tasks. The volume goes up to 55 billion in the year 2030. For 2024, 36.4 billion is estimated.

I believe that both segments have growth fantasies. What we are seeing more of today or since this year is the defense area. Inquiries in the defense area within NATO but also within the USA have increased significantly. As usual in such crisis times, first hardware is invested in, and then at some point you realize that you also have to integrate the hardware into control centers to be able to network them informationally. Therefore, for us, the defense topic is a very important growth field that will probably last for the next five to seven years, according to our calculations. We also believe that the air traffic control topic holds great growth potential, especially in Asia in the next three to five years. I mentioned it before, if you analyze the press of the last 12 to 16 months on the topic of airports and Asia, you will actually be flooded with PR news about where airports are being built in Asia. And wherever airports are built, there are also air traffic control centers and towers where corresponding Frequentis technology can be used. So I believe that these two segments have growth fantasies. Rail is a very, very slowly growing segment, which also depends on the corresponding safety regulations and budget allocations. Until you have built tracks and ordered trains, it takes forever and a day. So that segment is certainly one that lags behind in terms of speed. Nevertheless, the Green Deal in Europe with the commitment to invest many, many billions in rail infrastructure is of course just as relevant for us, but I think temporally shifted. Finally, public safety: I want to say that this MCX topic, mission critical broadband networks, is one of the largest growth segments for us in addition to our existing portfolio that we are betting on, because we simply see that in Europe more and more the topic of digital radio networks and their limitations for first responders is being recognized, and also in Europe the first budgets are being provided to renew this infrastructure. And I believe that this will give us enormous growth potential in the area of emergency services in three to four years for the next 20 years. So growth from my perspective everywhere, but temporally shifted with a high priority currently on the defense area and the air traffic control area.

Yes, Mr. Wagner, we have known each other for many, many years, and we are very grateful for your trust. I cannot comment on the stock price itself; it is a mystery to me because we actually have very good numbers and we have superb growth fantasies that are also reflected in orders. That is the most important thing, that you have enough orders. We have also spoken with many institutional investors about the free float. We want to go from 22% to 30%. That has two aspects: first, as you know, we currently do not need money, so it would only make sense if we consider a capital increase in the course of a larger acquisition. And as you know, we analyze about five to ten companies each year to see if we could expand via M&A. So that would be a compelling event for a capital increase and thus for an increase in the free float. The other thing is that investors say, look, if you increase the free float by 10% and then again only investors are there who hold the shares for 20 years, then that won't help you either. So we are still thinking a bit. I think the right way for us would be to continue working on a larger acquisition, which we are doing, and then in the course of an acquisition, also consider a capital increase and thus an increase in the free float. Many thanks, thank you, Mr. Wagner.

Yes, that is correct. We also analyzed during the IPO whether other industries that are safety-critical, because I think that is very important, our mindset, our DNA, our project methods for how we deliver and develop something are all geared towards the niche of safety-critical. And I think we would probably not be competitive in the commercial market with our mindset and methods because, for example, only two people are allowed to work on a system at the same time, never one alone. These are mechanisms in the safety-critical area that would not be applied in the financial services or automotive sector, for example. So we said we need to see if there are growth industries in the safety-critical area that are outside our five segments, i.e., outside maritime, public safety, public transport, defense, and civil ATM. And we came to the conclusion that we want to stay in the five industries we are active in today because we still see so much growth potential there that we don't want to be defocused. So the core direction is to expand our product portfolio within these five segments to make more of these 13 billion addressable for us. But what we are already doing is that four years ago we founded a new business development outside the business areas, which is our venture capital. There is a bit of trial and error and a startup mentality. So we try things out there. We have now dealt with the road for the first time, with the topic of autonomous driving, doing the first research projects. We are also looking at space and seeing if we can participate in that area. But that follows a business or innovation process, currently at stage 1 to 2 out of 7, before we transfer it into a business. And we will incorporate all ideas that come from air traffic control or other segments and could have relevance for the road. Currently, we are certainly not making a business out of it in the next three to five years because that is the cycle until such an innovation is transferable to other industries.

I think I mentioned it briefly in my presentation. We estimate we will need about three to four more years to finish building the software parts, containerize them, and develop them for the cloud. That will be a process of another three to four years, I estimate.

Yes, perhaps for the ATM area. In the ATM area, through acquisitions and R&D activities in recent years, we now have, except for the X10, which for those who don't know it is the new voice communication system of Frequentis that is supposed to replace the proprietary hardware solution Release 8. There are the first contracts in Canada, Austria, and also Norway as the first customers who have bought this data center solution from us and are going on this journey with us to be able to use pure software in voice communication. When we have X10, and we will continue to maintain Release 8 for another 10 to 15 years, it's not that we completely stop hardware production, and there are also a few gateways in the ATM area that we will continue to produce. We estimate that in three to four years, about 90% of our portfolio in the ATM area will have been converted to pure software. What will remain? Cameras for our remote tower solution will remain, Release 8 will remain because it is proprietary and we have maintenance and spare parts obligations for 10 to 15 years under our maintenance contracts, and the gateways we build in our networks will remain. Arrival management, TowerPad, our Prisma as ATM automation system, AMHS, AEM are all software solutions now. So I would say in three to four years we will have about 90% software in the ATM area. In the PST area, public safety, there is no hardware anymore. Public safety is now pure software through the development of LiveX. There is no hardware anymore, only a few old maintenance contracts for the old hardware solution, but 95% is software. In the maritime area, the Matrix solution is already 100% software. And in the rail area, through the large order we received from the Swiss railway at the beginning of the year, we now also have the financing to convert our proprietary solution, partly still in the rail area for voice communication, to the cloud, and we will go live with the project within the next three to four years. So that's roughly the timeline.

I don't know the Thales number. I didn't even know they publish numbers for our segment. I only know the group numbers, and that is primarily a military company that builds radars and weapon systems. I don't know if those are the ATM numbers from Thales. But for us, it is like this: about 50% of the customer R&D effort is paid from our EBIT. If you calculate what the total R&D expenses are that Frequentis has per year and what is self-financed, then we are at about 30% self-financing. The R&D expenses in 2024 will be around 90 to 95 million, and the net R&D expenses that are unfinanced are about 27 million, which corresponds to about 30%. So the numbers are actually much closer than they first appear. All clear, many thanks.

Yes, so perhaps going into a bit more detail. We see more and more use cases, areas of application for drones. New companies are emerging that construct drones, operate drones, especially for inspection flights, and now also for emergency services. That means police use them, military uses them, rescue services use them. And I am convinced that the ideas for how to use drones will continue to develop significantly over the next 10 to 15 years, over the next 10 years. What I don't really believe is the delivery of pizza by drone. I can hardly imagine that, but maybe there is a box that keeps it warm. But that use case, I don't really believe in it as much as the emergency services using them more and more. When you see the operational benefit for a fire department when a drone transmits camera images over a fire to better assess which extinguishing agents are needed to fight the fire properly, that is an enormous added value for a fire department because very often the wrong resources are sent, too many, too few trucks, too many cars. So it's really a challenge because the information about the situation on site is simply too limited to derive the right deployment measures. So the use cases will increase. I hope that the regulator in Europe will step on the gas and accelerate a bit. I know that many countries in the European Union are putting pressure on the relevant regulators to speed things up because people want to fly, companies want to fly, companies want to use drones. I think it is still unclear who is responsible. The question of responsibility still needs to be clarified, but the pressure from the technology side will be so great that I believe the legislator will react accordingly faster the higher the pressure becomes. For me, it's only a matter of time. So we view the topic of drones very positively, and we have already won the first four air traffic control centers in Europe that use our solutions. It's not just research projects; our drone solutions are already operational at four air traffic control centers and are being further developed there. So I have a very good feeling about this topic.

Yes, so regarding T, as I said, the partnership was signed this year. They have now trained their salespeople and built their value chains because they are responsible for bringing our software into the field there. We would only be a software supplier. It's a bit of a copy of the SAP model: we provide the software, and the third level behind for software maintenance and everything else on site is done by T. We have already seen a first pipeline in the first counties. I think by the end of next year we will see if this partnership works when the first deals are signed and delivered according to the new business model. But we are very confident because T US is a well-growing organization that specializes exclusively in the emergency services and energy supply sectors. Regarding the US business, I mentioned earlier that we have most of our value chain in the USA itself. Last year we also founded our own Frequentis Defense with security clearance for the classified defense business. Only US citizens are allowed there to pursue our military business and opportunities for the US Air Force, US Army, and US Navy in the USA and also deliver. They are also very independent of Austria. The only thing that tariffs could affect for us are the software licenses that we invoice to our subsidiary in the USA. We currently see nothing coming our way, but the value share is about 20% of the total project in the USA, so I would see that as a relatively manageable risk for us. Potential tariffs on deliveries to the subsidiary in the USA. The last point was Asia. In Asia, the pipeline is growing. This year we acquired a first major order in Asia in the public safety area. We have a good pipeline for next year, especially in the air traffic control area. I mentioned earlier that so many airports are being built in Asia; they need to buy corresponding technologies to carry out air traffic control. You know that in our market segment there are hardly any Asian competitors; they are all international competitors that we know well. Usually there are three to five worldwide that compete for these projects. So we see Asia as an absolute growth target for us over the next few years, with a well-felt pipeline over the next five years that we can already roughly estimate.

No, for me it's okay, we can answer them.

Yes, so our win ratio is between 45 and 48%. That means we win half of the offers we write. But that is also strongly due to the fact that we have good pre-qualification; we also do no-bid decisions for offers if we are not of the opinion that the offer makes sense for the Frequentis group. The second thing is regarding M&A. We analyze every year, we get teasers probably 25 to 30 per year. We then look at about 10 companies more closely and usually go into due diligence for one to two companies maximum per year. We have already made an acquisition in the technology area this year with the company Kreus, and no more are planned this year; we only have six weeks left. Whether one will materialize next year, we will see. I said at the last analyst conference that I don't want to overstrain the organization. We have bought 10 companies in the last 5 years. We also need time to digest them, fill them into the sales channels, generate opportunities, train everyone, and handle the post-merger integration processes. So we will certainly not proceed at the same speed as in the last 5 years, but we have a very concrete goal in which areas we would like to strengthen ourselves through which companies. Many thanks.

Yes, so for us, what are the effects for us as Frequentis? I must say, we have been in the USA for 25 years, and I mentioned at the beginning that we have experienced many presidents in the USA, sometimes Democratic, sometimes Republican, again Democratic, Republican. In the end, that has had no impact on our business. Of course, one can ask about China, but China is almost irrelevant for us; we do 2% of our order index there. China has never played a big role for us because, of course, due to export regulations, we are always restricted in what we export to China. So that would probably be the biggest threat for us, but in this case it doesn't exist. I believe that the security situation, security is one of our main growth drivers. I believe that the topic of security will continue to play a major role under the new president in the USA, and that is usually good for our customers that they get corresponding budget allocations over the next few years for infrastructure. And also if Europe implements the 2% NATO targets, that means significant budget increases for our customers. So I believe that it is actually a good prerequisite for Frequentis.

Yes, as mentioned at the beginning, of course with increasing growth, the absolute amount of R&D expenses also increases. That is clear, it's a certain ratio of revenue. What is important for us is how large the percentage of revenue that is unfinanced is, and we are always between 6 and 7%. I would like to mention again, look at our balance sheet; you will find no R&D expenses there that are capitalized because as a family company we do not want to leave debts to the next generation in terms of depreciation. We pay for everything from our EBIT. Of course, the goal is to reduce the unfinanced R&D rate in the medium term, but I would like to come back to the circumstance mentioned at the beginning that we are still in the transition from hardware-centric to software-centric solutions. Not everything is paid for by the customer; they naturally expect a contribution from us, and that is currently financed through the 6% unfinanced. So you can calculate that with 400 million euros in revenue, that is about 24 million that are provided from EBIT for unfinanced R&D by Frequentis. In the medium term, the goal is to reduce this, and we could certainly use one percentage point less in unfinanced R&D. That would be about 5 million more EBIT at half a billion revenue, but we need to complete the transformation. Many thanks.

Yes, if you look at the history of recent years and ignore the COVID period, I think we have already shown that despite significant growth and investments in technology and also in regional expansion, we have developed our margin very well from 4.9, 5.2, 5.4 now towards 6.5, 6.3. And of course, we are not the jack of all trades; we cannot drive everything to exorbitant heights at once. I would like to emphasize that in the last two years we had 18% salary increases in Austria due to collective bargaining negotiations because inflation was so high. Austria was unfortunately number one for a long time in terms of inflation rate between 8 and 9%. Those times are over now, and we have digested it quite well. We have said we stick to our guidance for this year that we gave at the beginning of the year at about 6%. Of course, our medium to long-term goal is to get the margin towards double digits. We compare ourselves with system integrators in the business IT system integrator business. We integrate our own software into the system environment of our customers. I would say that SMEs are at about 9 to 11%, and that is also a goal we are aiming for. I think in public safety, where we have transformed the business model to software, we have also proven that it works. Now ATM is next. When we have completed the investments and transformed the portfolio, we will also move towards a software-centric business model there and thus significantly increase the margins.

Yes, I would like to thank you for your time. I always enjoy presenting Frequentis and answering questions. Thank you for your interest, and I wish you all a nice evening in Germany or wherever you all are. Many thanks for your interest. Bye, bye.