U.S. markets close in 1 hour 34 minutes

Edited Transcript of WSU.DE earnings conference call or presentation 26-Jul-19 12:00pm GMT

Half Year 2019 WashTec AG Earnings Call

Mar 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Washtec AG earnings conference call or presentation Friday, July 26, 2019 at 12:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Axel Jaeger

WashTec AG - CFO & Member of the Board of Management

* Günter Blaschke

* Ralf Koeppe

WashTec AG - CEO, CTO & Chairman of Management Board

* Stephan Weber

WashTec AG - Chief Sales Officer & Member of Management Board

================================================================================

Conference Call Participants

================================================================================

* Eggert Kuls

Warburg Research GmbH - Senior Analyst

* Oliver Knobloch

Pictet Asset Management Limited - Senior Investment Manager and Portfolio Manager

* Richard Schramm

HSBC, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Dear ladies and gentlemen, welcome to the conference call of WashTec AG. At our customer's request, this conference will be recorded. (Operator Instructions)

May I now hand you over to Axel Jaeger, who will lead you through this conference. Please go ahead, sir.

--------------------------------------------------------------------------------

Axel Jaeger, WashTec AG - CFO & Member of the Board of Management [2]

--------------------------------------------------------------------------------

Welcome, everyone to the WashTec H1 Conference Call 2019. My name is Axel Jaeger, and I'm here with my colleagues, Dr. Günter Blaschke, Stephan Weber, Dr. Ralf Koeppe, Karoline Kalb and Sergej Wolodin. We will start with the key figures, revenues, EBIT and free cash flow and move on to the segment results by region and by product group. Afterwards, we will look at the P&L and balance sheet structure, followed by the guidance for fiscal year '19 and measures, i.e., cost adjustment and improvement program, plus further targeted activities for sustainable improvement that have been and will be taken to support WashTec development in fiscal year 2019. Last agenda point will be the introduction of our new Board members, Dr. Günter Blaschke and Dr. Ralf Koeppe.

Please move on to the next slide. The overarching motto for WashTec within this fiscal year is, as you know, all around clean cars. We do offer a full solution package to the world of car wash, and we constantly develop our portfolios to strive for a high level of customer benefit.

Within this fiscal year, we launched our new roll-over generation, SmartCare, to the public at several trade fairs in Germany, Italy and North America. We are constantly optimizing our offering of chemical solutions for car wash, and we are developing and testing our EasyCarWash app in several markets throughout Europe. We see an increasing demand in the field of tunnel installations, especially in metropolitan areas, and sustainability is getting more and more important in the field of car wash. WashTec is well prepared here with its offering of water reclaim systems, equally with chemicals and the general advantage of equipment-supported car wash compared with hand washing.

Next slide, please. Here, you see our key figures. The development of revenues, EBIT and free cash flow in the first 6 months of this year was mainly driven by lower key account business due to the uncertain global economic situation, i.e., orders from key accounts came and still come in with considerable delay. In the meantime, invest budgets of key account customer, especially in North America, are mainly released and accordingly, these orders were placed with us. This happened later than in prior years and therefore, could not be part of the 6-month figures as of June 13 (sic) [June 30] revenue-wise. However, direct sales development was strong and increased double-digit compared to last year.

North America and Australia are still in a turnaround situation. The improvement is step-by-step there. However, it will take more time to improve the situation by constant support and monitoring of the local organizations.

We increased head count year-on-year by 38, mainly in direct areas such as sales and service. As a consequence, personnel expenses increased from EUR 68 million to EUR 72 million as of June 13 (sic) June 30 . Free cash flow decreased due to lower EBIT and mainly an increase of net operating working capital, since we already manufactured machines and systems for the expected order entry to make sure we will be able to fulfill and turn as much as possible of the resulting order backlog into revenues within the remaining months of this fiscal year.

Next slide, please. Here, you see the results by our regional segments. Revenues in Europe and APAC are at the prior year's level. Direct sales revenues in Europe have been strong. North America is still behind, but slowly catching up. As of June 13 (sic) June 30 , revenues in North America are lagging key account revenues. However, the investment budgets of major key accounts in this region are released in June. The orders will now be placed step-by-step, and we are confident to increase revenues in this region in the course of the remaining fiscal year '19. Revenues in APAC are mainly driven by China, where WashTec is significantly growing, coming from a small base.

The EBIT in Europe is behind last year's figures due to more head count in areas with direct customer contact. EBIT in APAC is low due to the turnaround situation in Australia. Last year, the organization lost a large account and is currently working to regain this customer. The same applies to the situation in North America. EBIT is still low, but processes are constantly improving. We lost a large North American Chemical customer last fiscal year, as you might know. However, in the course of fiscal year '19, we managed to get this customer back and are currently working on the reintegration of this customer in our Chemical distribution network.

WashTec implemented an immediate cost adjustment and EBIT improvement program to reduce other operating expenses within this fiscal year. Additionally, we are working on concrete initiatives to constantly lower personnel expenses on a global scale from 2020 onwards.

Next slide, please. Our business -- sorry, our results by product group. Machine and service revenues are at prior year's level. Key account sales were below expectation, but direct sales were strong. Chemical revenues are nearly at prior year's level. Given that we lost a big customer in North America, we were able to acquire new customer for Chemicals, i.e., to broaden our customer base in Chemicals and as a consequence could keep Chemical revenues at nearly prior year's level.

In the meantime, we were able to regain the lost Chemical customer contract in North America. The reintegration of this customer in our North American distribution network will start throughout the fourth quarter of 2019. Overall number of washes, and that means consumption of chemicals, was below 2018 due to the unfavorable weather, particularly in Europe.

Revenues from other businesses, i.e., the [CWM] business, were lower as expected due to the sale of wash sites to customers in 2018 in -- mainly in France and Eastern Europe. We launched our new roll-over generation, SmartCare, at trade fairs in Münster, Bologna and North America. This new roll-over generation is based on a platform concept and offers numerous smart features. It will increase customer benefit in the car wash market. We expect to deliver the first systems in autumn 2019 to the premium segment of the car wash market.

Next slide, please. Profit and loss statement. Based on the seasonal cycle of car wash business, we do expect a stronger second half of the year. Gross margin decreased due to a different product and regional mix. The increase in personnel expenses comes from a global head count increase of 38 head counts compared to last year. The additional head counts are nearly all located in direct areas, such as sales and service. Increase in depreciation is mainly a consequence of the application of IFRS 16 from fiscal year '19 onwards. Right-of-use assets are capitalized in the depreciation as shown here.

Giving the lower EBIT as of June 13, 2019 (sic) [June 30, 2019], WashTec implemented an immediate cost adjustment and EBIT improvement program to reduce other operating expenses within this fiscal year. Additionally, we are working on concrete initiatives to constantly lower personal expenses on a global scale from 2020 onwards.

Next slide, please. Balance sheet structure. Balance sheet total increased to EUR 233 million -- EUR 263 million, sorry. Part of it was the first-time application of IFRS 16 from fiscal year '19 onwards. Right-of-use assets are capitalized at a value of roughly EUR 80 million. Equity decreased from EUR 95 million to EUR 67 million due to payment of dividends, EUR 33 million.

Net financial debt increased compared to December 31, 2018, due to dividend payment after the General Shareholders Meeting. Net operating working capital increased due to the increased level of stocks. We premanufactured incoming orders for machines to make sure to be able to deliver and install as much as possible within the remaining months of fiscal year '19, and as a consequence, turn the orders into revenue.

Compared to December 31, free cash flow development is, besides lower EBIT, mainly due to higher level of stocks in finished and unfinished good, i.e., machines manufactured based on latest order intake from key account; a lower level of collectible accounts receivable; and the lower level of down payments from customers.

Next slide, please. WashTec has a value-oriented and stable shareholder base. Given that the share performance during the second quarter of fiscal year '19 was below our expectations, based on the last dividend payment of EUR 2.45 per share, WashTec offers an attractive dividend yield to its shareholders. Total dividend payment in fiscal year '19 was EUR 33 million. The current dividend payout ratio is 96% based on net income. All of you have seen the drop of share price following the release of our preliminary results. Of course, this is disappointing. On the other hand, we are convinced that WashTec is a very attractive investment not only because of the very attractive dividend yield, but also because of the sustainable equity story.

Next slide, please. Guidance 2019, revised. We adjusted the guidance at July 5 based on slower business activities in key accounting during the first half of fiscal year '19. WashTec implemented immediate cost adjustment and EBIT improvement program to reduce other operating expenses within this fiscal year.

Additionally, we are working on concrete initiatives to constantly lower personnel expenses on a global scale from 2020 onwards. These measures should improve and secure profitability levels in the second half of this fiscal year. The program focuses, first, on tight management of other operating expenses, e.g., noncritical projects will be postponed; and second, on an effective reduction of personnel expenses, i.e., short-term measures in 2019. Additionally, WashTec launched further activities for sustainable improvement, e.g., global head count reduction on an individual basis from 2020 onwards.

[And finally], the turnaround process in North America and Australia will be constantly and tight followed. There is considerable support from headquarter for these foreign subsidiaries. Moreover, we on-boarded a new CFO in North America. In general, we do expect a stronger second half of the fiscal year 2019.

Next slide, please.

--------------------------------------------------------------------------------

Ralf Koeppe, WashTec AG - CEO, CTO & Chairman of Management Board [3]

--------------------------------------------------------------------------------

Okay. Ladies and gentlemen, I'm now on -- this is Ralf Koeppe speaking. I'm the new CTO. I'm now on board at WashTec for 3 weeks, and the current situation is not all new for me. I have been in this situation in my previous assignments before. This situation also enables us to focus on the most important projects for our company, and I am already well focused on these topics to guarantee delivery and focus on these ones.

Before joining WashTec, I have been with Bosch Rexroth for almost 5 years, acting as CTO of the automation and electrification business unit. These are the component businesses of drives, controllers and servo motors. Before that, I've been over 10 years with KUKA, heading as VP, R&D Development of Robotics here in Augsburg.

--------------------------------------------------------------------------------

Günter Blaschke, [4]

--------------------------------------------------------------------------------

My name is Günter Blaschke, and I guess you all know me. I'm here just for a couple of months to teach Dr. Koeppe [the -- exercise free], to focus on -- to making focus on the more technical side and get very deep into this. And in the meantime, I help to drive our performance program, that means head counts and other operation accounts and other issues, mainly.

--------------------------------------------------------------------------------

Axel Jaeger, WashTec AG - CFO & Member of the Board of Management [5]

--------------------------------------------------------------------------------

Thank you. So we move on to the next slide. This is the last slide. You see our financial calendar and the events where we will be, so to say, to get your questions.

Thank you very much, so far. So I think from our side, we are now open to your questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question is from Eggert Kuls, Warburg Research.

--------------------------------------------------------------------------------

Eggert Kuls, Warburg Research GmbH - Senior Analyst [2]

--------------------------------------------------------------------------------

I have a question regarding your indicated restructuring cost, which could be booked in H2, 2019. So I saw that you will give more color on that with the release of Q3 figures. But maybe you can give a rough idea of how many people you want to get rid of as we talk. And it seems to be a little bit after you have raised capacity and installed more salespeople that you are now adjusting your head count a little bit to maybe somewhat lower economic growth expectations. Is that assumption true?

--------------------------------------------------------------------------------

Günter Blaschke, [3]

--------------------------------------------------------------------------------

So first of all, if you see our top line development then since 2017 -- end of 2017, in 2018 and in 2019, we do not have the same high number of growth anymore at these 2 years. But we still -- because our expectation was different, we still were prepared and have prepared also in cost and capacities to go on the, let's say, 3% to 5%, 6% line growth. Since we haven't got to this, as we know, but this year, most likely, we will also have a more stable business, but not a fast-growing business [with this]. And also looking into the overall worldwide economy, we felt that it's necessary now to go back to the level which we had end of '17. So that means having -- the sales account is not growing that much, then we also with some efficiency, which we have to get after, then we may can also do the business in an environment of 2017 overall cost. More specification would follow.

--------------------------------------------------------------------------------

Eggert Kuls, Warburg Research GmbH - Senior Analyst [4]

--------------------------------------------------------------------------------

Okay. And maybe on North America, so the situation so far this year has not improved. But you unchanged expecting for the full year better development compared to 2018, especially on the profit side. So this -- so from that point of view, it seems that you are expecting a very strong second half of the year. And I just heard that you are expecting key account orders to be booked in the course of Q3. So can we assume that these orders will be shifted to the customers already this year? Or is that something for next year?

--------------------------------------------------------------------------------

Stephan Weber, WashTec AG - Chief Sales Officer & Member of Management Board [5]

--------------------------------------------------------------------------------

Okay. This is Stephan Weber speaking, CSO. Yes, everything you cited, all the assumptions you made are totally correct. There were some delays, and we are seeing it already in June. It started in July very strongly, the order intake picking up and, I would say, solid. And since these orders are coming now, we are also confident that we can deliver and install within this fiscal year. That's why we still support the significant growth story in the U.S. and a change in the EBIT as well.

--------------------------------------------------------------------------------

Eggert Kuls, Warburg Research GmbH - Senior Analyst [6]

--------------------------------------------------------------------------------

Okay. Okay. Yes, I think that's all the time being. So I think I had one more question, but I have to think about, so maybe I come back later on that.

--------------------------------------------------------------------------------

Operator [7]

--------------------------------------------------------------------------------

The next question is from Richard Schramm from HSBC.

--------------------------------------------------------------------------------

Richard Schramm, HSBC, Research Division - Analyst [8]

--------------------------------------------------------------------------------

So I would like to come back to this key account business. I'm still not able to see where the difference is now between the situation when we had the Q1 call. At that time, you also showed very high confidence that already in Q2, the ailing key account business would turn around and things would take off and the shortfall achieved in Q1 would be made up. Can you elaborate a bit what really have changed since then? I cannot see the point because the visibility you have from your order backlog is obviously not more than a quarter at best, if I'm right.

And also concerning the budgets of your key account customers, you say these budgets are now okayed by the customers, but the customers are still reluctant to place orders out of these budgets. So I would be interested in what visibility you have in respect of these budgets. Are these higher than in the previous year? Are they lower? Or is it the same? And what makes you confident that really the customers will make full use of these budgets or will not tend to further push out order placement here maybe into the next year?

--------------------------------------------------------------------------------

Stephan Weber, WashTec AG - Chief Sales Officer & Member of Management Board [9]

--------------------------------------------------------------------------------

What makes us confident? Let's put it this way. I mean we know the budgets because we are in constant, let's say, conversations with the key accounts, but as you rightfully say, we were optimistic in Q2 already to catch up here, which didn't happen. So you rightfully asked the question, what gives us more confidence now? One, we have to distinguish between the European and the American situation. In Europe, we are more or less trading on the values that we could foresee, maybe except for one account, where we see the stabilization now in July. But I think the biggest and the strongest change, that's also where the confidence comes for the overall forecast for the group also, that we can still make a significant growth story in the second half. It's coming from the U.S., where we are so far not even on last year's level, which was anyway not a very good year.

However, we are now looking at an order intake, particularly in the U.S., let's look at it this way. In July, that is almost triple the level that we had last year. So we can say that July order intake already will, let's say, solidifies our belief that we can catch up in the U.S. And that, of course, is contributing to the overall global key account story in order to support what we have published so far. I hope that was a decent explanation.

--------------------------------------------------------------------------------

Richard Schramm, HSBC, Research Division - Analyst [10]

--------------------------------------------------------------------------------

Yes. But just can you confirm that you know the budgets of your customers also in terms of size? And again, are these budgets stable versus previous years? Or have customers scaled back here? Or what does these budgets look like?

--------------------------------------------------------------------------------

Stephan Weber, WashTec AG - Chief Sales Officer & Member of Management Board [11]

--------------------------------------------------------------------------------

Yes. I mean what I tried to indicate is that they're on a -- let's say, on a stand-alone regular investment level, but not on a peak investment level like in 2017, which gave us, in total, together with the direct sales, a EUR 50 million growth. And we are aware of the budgets, we know what their budgets are. And like I said, in the meantime, most of them are working in the line with the budget expect for one larger account, which is now also delivering the numbers that they have promised to us and that are part our agreements with them. And that's as we believe that -- or are convinced that Q3 and Q4, particularly in the U.S., will deliver better results.

--------------------------------------------------------------------------------

Richard Schramm, HSBC, Research Division - Analyst [12]

--------------------------------------------------------------------------------

Okay. And then another question I might give you on the cost reductions. My colleague also pointed out that this looks pretty procyclical at the moment, or do you have, obviously, lost phase in sustainable growth and do not consider the current situation as a kind of a temporary breathtaking before your growth path might be resumed from next year onwards? So should we take this as a sign that WashTec has somewhat overestimated market growth here? And is the scaling back also a mid-term perspective here for the market?

--------------------------------------------------------------------------------

Günter Blaschke, [13]

--------------------------------------------------------------------------------

The answer is that we are using this specific time where growth is slowing down to really, if I can say so, clean the house. We have a hired over the last year more than 100 people and, as you know, in the hectic of growth, you not hire -- not everyone is a top performer. So we use the situation to clean the table, to be critical, to improve processes and do our housework, if you like. So there is no change in our business model, there is no change in our growth perspectives, it is just a slowdown, which we use to optimize the entire organization and the entire way we work.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

The next question is from [Michael Keller] of (inaudible).

--------------------------------------------------------------------------------

Unidentified Analyst, [15]

--------------------------------------------------------------------------------

I've got 2 questions. The first is, you told us you've got an immediate cost adjustment program. So can you point out what do you exactly do? Where are cost cuts? And the second is also concerning jobs. You told us you want to lower personnel expenses, and you've got currently about 1,800 employees. So much employees do you want to have, for example, in 2020? And maybe a third question, how much does affect this program, the site -- the factory in Augsburg?

--------------------------------------------------------------------------------

Axel Jaeger, WashTec AG - CFO & Member of the Board of Management [16]

--------------------------------------------------------------------------------

Well, first of all, immediate cost reduction is other operating expenses only. That's the first step that we address. Quick measures just to lower the cost base and to reduce other operating expenses within the remaining months of this fiscal year. Second, we are closely analyzing our head count, but not in Augsburg, but on a global basis. So we are looking on our global organization, where we can optimize what are the areas where we have efficiency gains that we can realize, but this is still in analysis and will be communicated later.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

There are currently no further questions. (Operator Instructions) And we have a follow-up question from Eggert Kuls, Warburg Research.

--------------------------------------------------------------------------------

Eggert Kuls, Warburg Research GmbH - Senior Analyst [18]

--------------------------------------------------------------------------------

Yes. Maybe a follow-up question on the global platform rollout. So I understand -- I understood earlier that this is a key project to improve margins over the next couple of years. The question here is, is that going according to plan? Or is that maybe postponed because you have to look for other things like slower growth or reduction of personnel or reduction of other operating expenses?

--------------------------------------------------------------------------------

Axel Jaeger, WashTec AG - CFO & Member of the Board of Management [19]

--------------------------------------------------------------------------------

What we mentioned is that we are introducing a new rollover platform with new features, technical features based on a, so to say, modular concept, and we introduced this machine into the market, and we showed it, so to say, sneak previewed to the customers at several trade fairs. And we will start according to plan to introduce the machine to the market, to sell machines in the fourth quarter of 2019.

--------------------------------------------------------------------------------

Günter Blaschke, [20]

--------------------------------------------------------------------------------

So this area on the product side, on the product development side, on the technology side, we don't stop anything.

--------------------------------------------------------------------------------

Eggert Kuls, Warburg Research GmbH - Senior Analyst [21]

--------------------------------------------------------------------------------

So everything as communicated earlier. Okay. Maybe...

--------------------------------------------------------------------------------

Günter Blaschke, [22]

--------------------------------------------------------------------------------

It's not coming earlier, it's coming as planned.

--------------------------------------------------------------------------------

Eggert Kuls, Warburg Research GmbH - Senior Analyst [23]

--------------------------------------------------------------------------------

No, no, no. I mean everything is going according to plan, as you have already communicated some months ago, so this was right. Okay. Maybe very last question. How should we model the second half of 2019? So I saw that your order backlog at end of June was a little bit down, and usually, the order backlog is a good indication for the development in the next quarter. So from this point of view, I guess, Q3 could be, again, somewhat restrained or at least not better than last year. So everything has to be generated in the fourth quarter. Is that a fair assumption?

--------------------------------------------------------------------------------

Stephan Weber, WashTec AG - Chief Sales Officer & Member of Management Board [24]

--------------------------------------------------------------------------------

In terms of revenue, that's a fair assumption. I mean anything that comes in early part of Q3, you will see some revenue of that already in -- also in the -- in Q3. That means order intake beginning of Q3 will also be revenue within Q3, and that's also why we keep the forecast and the guidance for the U.S. because we are now getting these early orders in the first part of Q3. And as you might have seen, we are basically on par in Europe, so in other words, we are not better, which we hoped to be at this point in time, although that we are fully on par to last year, and we are, let's say, limiting in the U.S. until today.

And with this excellent order intake now in July, late June, early July, we can see that we will see significant impact already in Q3 in the U.S., development towards end of Q3 and likewise also a bit into Q4. On the other side, we also have to see that last year, particularly Q3, was not strong at all, in other words, compared to previous years, so that gives us, with the offer funnel that we have at the moment basically -- or let's say, giving us the ideas to provide the guidance as we have done.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

And we have another question from Richard Schramm from HSBC.

--------------------------------------------------------------------------------

Richard Schramm, HSBC, Research Division - Analyst [26]

--------------------------------------------------------------------------------

I wanted to ask about this new SmartCare because you underlined that it's going to be aiming at the premium segment of the market. So can you give us a bit of more information? How big this premium segment is? Is it about 20% or 30% of your new equipment sales? Or is it even smaller? And is premium also a difference to be seen between markets? Is premium in Europe something different than, for example, in North America? Because I think the market especially has very high hopes for this new product, and I'm not sure if these high hopes are fully justified here.

--------------------------------------------------------------------------------

Stephan Weber, WashTec AG - Chief Sales Officer & Member of Management Board [27]

--------------------------------------------------------------------------------

I cannot say anything about the high hopes of the market. You know that's on your end of that story. In other words, I can only tell you -- answer your questions. The premium segment is something that we described depending -- there's a certain spread in the premium as well. Some we've been, let's say, 15% to 25% depending on how far we spread the premium downwards. I mean we talk premium, and that's what the SmartCare is delivering at this point in time is a 15% market -- part of the market as it stands now.

And we have to say, we have to be fair also, the premium has now been also newly defined because the SoftCare Pro 2 (sic) [SoftCare2 Pro], which was before our premium product, was the premium of the premium in the market, and now we have added some very interesting customer benefits into the new machine, also preparing the new age of digitalization. And in that subset we haven't, in other words, defined a new premium range above the so-far-existing premium range. And we also have like -- as I said before, we have also recorded some orders already, which will be delivered from October onwards.

And I would say to the last part of your question, premium is more or less premium everywhere. I mean I would say everything that is a super premium in Germany would be a super, super premium in the U.S. because the market is at, let's say, one level lower, but it will only help to boost this machine even better than in Europe because it will define an even never seen, let's say, standard in the U.S. market.

--------------------------------------------------------------------------------

Günter Blaschke, [28]

--------------------------------------------------------------------------------

And it's not only a platform for products and help for the manufacturing side. It helps on the manufacturing side. It's also a complete new platform for the future digitalization. So we have a quantum leap here in difference to the existing product, whilst digitalization is optioned out of this and also being the platform for further digital development. So this is basically a new era, it's 4.2, if you like, for the car wash industry.

--------------------------------------------------------------------------------

Richard Schramm, HSBC, Research Division - Analyst [29]

--------------------------------------------------------------------------------

Yes. And just to get an idea of the pricing you can achieve in this product. Will it be then also at a new, let's say, premium price level? Or are the advantages more with your production and you will go out with more or less the same price level as before?

--------------------------------------------------------------------------------

Günter Blaschke, [30]

--------------------------------------------------------------------------------

We are still finding the right price level. The only thing we can tell you is, we were surprised how big key accounts were excited when they have seen it and what this offers to them for the future. The final price finding is now still in discussion market-by-market, and yes, we can -- by the end of the year, we may have a clear picture how to position this new performance level price-wise.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

And the next question is from Oliver Knobloch, Pictet.

--------------------------------------------------------------------------------

Oliver Knobloch, Pictet Asset Management Limited - Senior Investment Manager and Portfolio Manager [32]

--------------------------------------------------------------------------------

I have also just one question on the SmartCare. Can you be a little bit more concrete about the customer advantage for the car wash operator? Has the higher throughput with machines, has the total cost of ownership decreased? And is it easier to install or quicker to install? That's the first part of the question.

And then I have another question. Since you presented the machine already at a couple of trade shows, do you have the impression that some of your key account customers are waiting for the serial production of this machine and therefore, were a little bit shy to use the budget with the old machine?

--------------------------------------------------------------------------------

Stephan Weber, WashTec AG - Chief Sales Officer & Member of Management Board [33]

--------------------------------------------------------------------------------

First of all, when coming to the advantages, I think that would be a little bit too long for this, let's say, telco here on the investor side. I can only give you -- let's say, the best view and benefit argumentation you will find on our website, where we explain all the advantages of SmartCare as it is. Basically, it offers better cleaning results, it offers faster wash programs, and it, what we call, is prepared for digitalization, in other words, can be remotely driven in many aspects like chemical dosage, can be changed off-line -- online, and in accordance to needs. We can dose more chemicals at the front where maybe there are some insects on the wheels, and we can use the same over and do less on the top of the car, for example, which is also an ecological as well as economical part of the story. So -- but have a look at the web page, and there is basically -- the main advantages are explained, I believe, very well.

The second thing is, you said at a couple of trade shows that's -- it's exactly 1 couple, it's a 2. In other words, we showed it in Münster and we showed it in Bologna, and the feedback was great.

Coming back to your last question, with regards to the key accounts, yes, they were invited. They were all, let's say, positively surprised of what we have managed to create. However, the first orders that we got, and that is not a surprise, we got all from direct customers. That means customers that do spend their own money and not a budget because within key accounts, as you might know, we are usually in longer tender agreements. And in the tender agreements, there is a certain set of machines is specified. And if there is no need, then nobody, let's say, deviates from this, neither we nor the key accounts.

Nonetheless, one or the other wants to have a trial on the new machine, and we are already in making discussions on that in order to see where the performance differences are. But first -- this first wave of orders will, and it was never expected differently, come from direct customers.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

There are no further questions. I hand back to you, gentlemen.

--------------------------------------------------------------------------------

Axel Jaeger, WashTec AG - CFO & Member of the Board of Management [35]

--------------------------------------------------------------------------------

Thank you very much. So we will end the call. Have a nice day.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.