TeamViewer AG

XETRA:TMV

Ladies and gentlemen, welcome to the Q1 2025 Results and Analyst Call. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Bisera Grubesic, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, ladies and gentlemen, and welcome to TeamViewer's Q1 '25 earnings call. I am Bisera Grubesic, Head of IR. And today, I am joined by our CEO, Oliver; and CFO, Michael. As per usual, Oliver will run you through the quarterly business highlights, and Michael will present the financials. And the presentation will be concluded by a Q&A session.

If we move to the next slide, today, we will present non-IFRS pro forma top line and adjusted EBITDA performance. Pro forma figures are prepared for better comparability and transparency following the combination of TeamViewer with 1E on 31st of January '25. Historical pro forma financials are not prepared below EBITDA and the cash flow. For details on how we prepared pro forma figures, please refer to the press release and the appendix of the presentation. Please note that you can find the important notice and the APM disclosure also on Slides 2 and 3 of the presentation.

With this, I hand it over to Oliver to kickoff our presentation.

Thank you, Bisera. Good morning, everyone. Also a warm welcome from my side. Thank you for joining our call today. And as usual, let me begin with the highlights of the last quarter.

Q1 2025 was really a good start into the year for TeamViewer. On the top line, we recorded a strong pro forma revenue growth of 7% in constant currency year-over-year with good contributions from all regions. As in the last quarters, Enterprise was really driving growth with a strong double-digit pro forma revenue increase over the prior year of 21% in constant currency. This came on the back of numerous high-value deals for both TeamViewer and 1E over the last 12 months as well as from new Frontline projects within the quarter. Our ARR showed a good growth as well, up 7% in constant currency on a pro forma basis. And profitability was strong in Q1 with pro forma adjusted EBITDA up 20% year-over-year and a strong margin of 43%. This was largely due to optimized marketing spend. After the 1E acquisition, we further optimized our financing in the first quarter, and we already improved our net leverage ratio to 3.1x adjusted EBITDA of the last 12 months.

Overall, first 3 months set a cautiously positive tone for the year against the backdrop of a challenging macro environment. We're making good progress on the integration with 1E with exciting new products already launched and the pipeline is building nicely. We recognize though that we are still in an environment with increased macroeconomic uncertainties and reduced visibility. And while we're being cautious, we reiterate our pro forma full year 2025 guidance. We anticipate continued top line growth on a pro forma and like-for-like basis. And as usual, let's now take a look on how the regions and customer categories developed in the quarter.

After a sales kickoff in January, all regions started very well into the year and continue to grow. Pro forma and in constant currency, Americas recorded the strongest revenue increase of 10% year-over-year. EMEA grew at 6% and APAC by 4%. Main driver of this performance was the continued strength of our Enterprise business as well as 1E's enterprise-focused client base, which was supported by a number of high-value deals over the last 12 months. Continued strength of our combined Enterprise business is highlighted by its double-digit growth rates.

Pro forma Enterprise ARR grew nicely by 20%, while revenue was up 21%, both in constant currency year-over-year. With the addition of 1E's business, Enterprise now makes up almost 1/3 of our total revenue, further accelerating our transition to a more enterprise-focused software provider. And in the current quite challenging environment, SMB pro forma ARR and revenue recorded a solid increase of 2% each year-over-year. Let us now look at the development of our different ARR value ranges in Enterprise and in SMB.

Pro forma and in constant currency, as you can see on the right side, and just reiterating what I said, our Enterprise business showed strong double-digit growth rates across all value ranges with the strongest increase of impressive 28% in the highest bucket with deals above EUR 200,000 ARR. This is mainly related to 1E's high-value deals won in Q2 last year. And on the left side, we can see the development in the -- for SMB in the quarter. Here, the highest value range with ARR of EUR 1,500 to EUR 10,000 showed high single-digit growth of 7% year-over-year, underlying our success in up and cross-selling.

The lower value SMB bucket was flat year-over-year for several reasons. Customers in the entry bucket are highly price sensitive and therefore, cautious in the current macroeconomic environment. And moreover, we saw less contribution from our free-to-paid campaigns this year compared to last year. And we were able to again successfully move customers upwards within the buckets. To reignite growth in these buckets, again, we have already prepared and partially started a few initiatives, which I will talk about in more depth on the next slide. These initiatives include new dedicated leadership for the SMB business, new product innovation with comprehensive marketing support to expand into adjacent markets, more SMB targeted brand campaigns and a unified e-commerce experience across webshop and product.

Overall, we continue to be successful in selling product add-ons to SMB customers and moving them to Enterprise. In the first quarter, net upsell from SMB to Enterprise amounted to EUR 17.6 million, which is an increase of around EUR 400,000 sequentially. To sum this up, while there is still work to do in the SMB segment, of course, we are very happy with the continued strength of our Enterprise business and the upsell. I will dive deeper into both categories on the next slide. Let me elaborate a bit more on what we've done concretely in the first quarter to set us up for success in 2025.

Regarding our Enterprise business, we have followed an approach that was proven to be successful in the last years as well. It is important to meet a lot of customers and prospects early in the year to start conversations and be able to develop these leads into business over time. The entire Management Board was present at relevant industry events like Hannover Messe, the HumanX AI Conference or Gartner's Digital Workplace Summit in the U.S. Additionally, we hosted our own Experience Days in China and Japan around the Formula 1 races to connect with our local partners and customers.

My personal highlight was the kind of talk at Hannover Messe together with Siemens and our joint customer, GE Aerospace. Their CIO, Engineering presented how they used our spatial solution to digitalize the training of their technicians globally. They used to do that on a 600-page service manual with over 1,000 process steps and 200 components. Now they use digital twins of the aircraft engine and step-by-step instructions based on our Frontline AR platform for a completely new, fast and scalable training approach. Great to see how such real-life examples spark conversation and inspire other customers at these industry events.

On the other hand, I have mentioned a few minutes ago, we've also made a lot of progress in the SMB segment, especially in the context of the 1E integration. Already mid-March, so only a few weeks after we closed the acquisition end of January, we were able to present first integrations between TeamViewer and 1E technology. Concretely, the real-time endpoint visibility of 1E's DEX platform was integrated into our device monitoring, which is part of our remote monitoring and management solution for SMB customers. And only yesterday, we went one step further and announced TeamViewer DEX Essentials, a new add-on to our remote connectivity platform and especially interesting for SMB customers. I will explain it a bit more in a few minutes. Of course, we continue to work on deeper integrations and new offerings and are planning another SMB targeted product launch within the next weeks.

Additionally, I would like to highlight 2 additions to our senior leadership team as they are relevant for our SMB business, as indicated before. Earlier this year, our previous VP of Acquisition Marketing, Rolf Anweiler, took over a new role to be responsible for the entire SMB go-to-market strategy and execution at senior leadership team level. And we have brought in Debbie Lillitos, our new Chief Customer Officer, with a clear mandate to drive customer centricity inside the organization. With the above-mentioned very concrete plans and activities, we are optimistic to bring our SMB business forward in the course of the year.

Now let me give you an update on the progress of our integration of 1E. We've already successfully completed the first phase and are well on track to complete the majority of the integration within 12 months after closing. In terms of go-to-market, we already enabled cross-selling of our Enterprise products and pipeline generation at the beginning of the year. Since then, we've had good discussions with TeamViewer and 1E customers and the pipeline is developing nicely. With our new DEX Essentials offering for SMB, we've taken important steps towards SMB cross-selling, which will serve as the basis for our integrated go-to-market readiness in 2026.

Looking at product and technology, I already mentioned that cross-product integration started as planned with the launch of our first integrated solution mid-March and the announcement of DEX Essentials yesterday. We are now working on aligning our separate product strategies and road maps to fully integrate them in the next few months. And on the last point on this slide, processes and infrastructure, which are crucial for building a successful organization. Our structure has already been streamlined across departments and we are very well underway, integrating our office locations, processes and separate IT infrastructure, such as the CRM and the ERP systems. We will continue to assess synergy opportunities as we progress with our transition plan and make sure to capitalize on potential optimizations.

The next slide shows the new product I talked about already several times. TeamViewer's DEX Essentials is an add-on license to our remote connectivity platform that brings the power of digital employee experience to our existing SMB customers using TeamViewer for remote, support and access. DEX Essentials is an out-of-the-box and easy-to-deploy version of 1E's DEX platform to help any IT team proactively manage and optimize the digital workplace, no matter at what scale. With this offering, we are the first ones to bring the enterprise-grade DEX capability down market. Going forward, we can make it available for our entire customer base, exactly as we told you when announcing the 1E acquisition in December last year.

DEX Essentials can be accessed from an existing TeamViewer remote connectivity account and it automatically detects and remediates IT issues through automated script. The product is available in an early access program now and will become commercially available later this month. First feedback from customers is very promising and shows that the combination of remote connectivity and DEX technology hit the nerve to make IT operations seamless and efficient.

To round up my part of this presentation, I would like to share with you our latest marketing campaign to enhance brand visibility and awareness globally. We launched this campaign last week ahead of the Miami Formula 1 Grand Prix with large out-of-home billboards at airports and additional digital advertising. The campaign is centered around our vision to become the leading digital workplace company. Our solutions support employees in their workplace, no matter in which company, which industry, which job, whether we talk about IT help desk people, nurses, race car drivers, field service technicians, product designers or warehouse workers. They have different tasks and responsibilities, but all of them benefit from TeamViewer solutions as we enable digitization, enhancement and automation of their daily work processes.

The result for companies across verticals is increased customer and employee satisfaction, reduced machine downtime, time and cost savings, faster onboarding of new colleagues, overall higher productivity. This campaign will run throughout the year and include a broad variety of channels and placements. We are looking forward to this new campaign and are very confident to further shape our positioning as a vendor of innovative digital workplace solutions for SMB and Enterprise customers across regions.

And with this, I would like to hand over to Michael for the financial overview. Thank you.

Thank you, Oliver, and good morning, everyone. Let us now have a look at our financials for the first quarter of 2025. If we go to the next slide page, please.

Given the macroeconomic uncertainties, I am pleased to report that TeamViewer had a good start into the year. Revenue and ARR were each up 7% in constant currency year-over-year. At EUR 190 million, revenue was slightly above our expectations, supported by good inflow from Frontline deals. ARR reached almost EUR 760 million. This was driven by a strong double-digit ARR growth of our enterprise business, which was up 20% in constant currency and reached EUR 224 million. Supported by 1E, Enterprise NRR improved to 103% in the quarter and adjusted for net upsell from SMB customers to Enterprise, the NRR reached very good 108%.

Looking at our profitability on the right, we can see a significant adjusted EBITDA growth of 20% year-over-year to around EUR 82 million. Our margin expanded by 4 percentage points year-over-year to 43%. Our profitability has benefited from optimized marketing spend despite the dilution of -- from 1E's profitability in the consolidation. Pro forma adjusted basic EPS reached EUR 0.29, which is an increase of 30% over TeamViewer stand-alone in the prior year. And I am pleased to share that we improved our net leverage ratio to 3.1x, down from 3.2x at closing end of January.

Now let's dive into the details of our results. Next slide, please. The first quarter marked a good start into the year with continued strong revenue and ARR growth and strong profitability. Q1 pro forma revenue was up 7% year-over-year. TeamViewer stand-alone revenue was EUR 172 million, up 7% in constant currency year-over-year, which was mainly driven by Enterprise and Frontline deals. As we have seen in Q4, there was again good traction from Frontline deals. Q1 revenue exceeded our expectations due to revenue phasing from Frontline. 1E stand-alone delivered double-digit revenue growth and reached pro forma EUR 80 million on the back of high-value deals from the previous year. ARR also grew by 7% in constant currency on the back of successful up and cross-sell motions in all regions in Enterprise. Considering the challenging macro, this is a very solid result. Pro forma adjusted EBITDA reached EUR 82 million in Q1, up 20% year-over-year. And as I already explained, we generated a strong adjusted EBITDA margin of 43% in the first quarter.

Let us continue with our Enterprise business on Slide 15, please. Enterprise consistently delivered strong performance with double-digit growth in both ARR and revenue. Pro forma revenue amounted to EUR 60 million in Q1, an increase of 21% year-over-year in constant currency. Next to 1E's year-over-year revenue growth, revenue inflow was also strongly supported by Frontline projects in the quarter. Please keep in mind that historic quarterly 2024 growth rates shown in these charts reflect TeamViewer stand-alone, while the shown quarterly euro amounts are pro forma. However, even so, you can clearly see the seasonality of our Enterprise business with increased momentum towards year-end. Going forward, we expect this trend to become even more pronounced with the growing share of Enterprise in our revenue after the 1E acquisition.

Pro forma Enterprise ARR shows a steady, very strong year-over-year increase of 20% in constant currency in Q1. As a reminder, 1E secured a major high-value deal in the U.S. during Q2 last year. While it is possible that we may land similar high-value deals in the future, it is lumpy, and these deals are not something we can plan for. As a result of tougher comps in phasing, this will impact the year-over-year growth in ARR for Q2. This phasing is totally according to our plan. As I will explain later, we have reiterated our full year guidance for ARR.

Supported by the 1E acquisition, Enterprise net retention rate improved by 3 percentage points compared to TeamViewer stand-alone in Q4 to 103% in Q1. Adjusted for upsell from SMB customers during the period, Enterprise NRR reached 108%. This slight sequential decrease of the NRR adjusted for net upsell is also due to 1E in the mix, which is an enterprise-focused business and does not have these upsell motions. The absolute amount of net upsell increased by EUR 4,000 quarter-over-quarter, as Oliver pointed out already. On the top right, we can see Enterprise ASP and the number of Enterprise customers. Both KPIs are now calculated based on ARR. Pro forma Enterprise ASP amounted to EUR 44,000 per customer, an increase of 6% year-over-year. The number of enterprise customers grew by 14% year-over-year and now amounts to 5,044.

Let's now move on to our SMB business on Slide 16. As Oliver already pointed out, in general, the lack of visibility and constantly changing macro dynamics also affect our SMB customer base to some extent. Despite this, the performance of our SMB business was overall solid in the first quarter. On a constant currency basis, pro forma SMB revenue grew by 2% year-over-year to EUR 130 million. SMB ARR grew in line with revenue at 2% in constant currency year-over-year and amounted to EUR 535 million at the end of the quarter. Pro forma SMB ASP was up 2% year-over-year to EUR 813, supported by some limited price increases in some countries. As with Enterprise, this number is now calculated on ARR.

The number of SMB customers was 658,000 at the end of the quarter, which was largely stable year-over-year. Customer churn now also based on ARR is slightly up to 15.3%. This can be attributed to successful free-to-paid campaigns in the prior year quarter, which often lead to higher churn at the end of the subscription period. This quarter, we were less active with free-to-paid campaigns, which in return resulted in less customer inflow at the lower end compared to prior year. We now focus more on improving onboarding and customer retention to better help our customers, making the most of our solutions and customizing the product to their needs through additional add-ons.

Let us now take a look at our cost base on the next slide. We delivered a strong pro forma adjusted EBITDA margin of 43%, up 4 percentage points year-over-year. This very good development is mainly a result of the optimized marketing spend with Frontline revenue inflow also contributed to a slightly better margin than we expected for Q1. Overall, recurring costs remained stable year-over-year despite our continued investments in growth. Cost of goods sold were 9% of revenue as we expected and reflect phasing effects, continued investment in our product platform and the development -- deployment of Frontline projects. Sales was 9% higher year-over-year as we hired new sales talent over the last few months, mainly in EMEA and Americas to support our growth strategy. Sales as a percentage of revenue remained stable at 16%.

As Oliver explained, we launched a new brand campaign end of April, named Make Work Work Better. As a result, we will see somewhat higher marketing costs in Q2 than in Q1. R&D expenses were up 7% year-over-year as we invested in new products and hired new in-house developers. This was offset by a reduced number of external R&D contractors. While G&A costs increased year-over-year due to phasing effects, they remain broadly stable as a percentage of revenue. Other expenses were up as a result of lower proceeds from derivatives. Let us move on to net income and EPS development on Slide 18.

Our pro forma adjusted earnings per share amounted to EUR 0.29 in Q1, a significant increase of 30% year-over-year compared to TeamViewer stand-alone. Please refer to Page 8 of the earnings press release for details of the pro forma adjusted net income bridge. Main driver for this very strong result is the optimized marketing spend and the 1E contribution in the quarter, which led to an IFRS EBITDA of nearly EUR 67 million, up 26% year-over-year. Total interest expenses almost doubled as expected compared to the prior year quarter and reached EUR 8.6 million in Q1, up EUR 4.4 million year-over-year. Unsurprisingly, the reason for this was the financing of the 1E transaction. At the same time, share count was around 5% lower due to our continued buybacks during 2024 and further supports EPS growth in the quarter.

With this, let's move on to cash flows on Slide 19. Adjusted for nonrecurring cash flow items, levered free cash flow amounted to EUR 44.5 million in Q1, up 10% year-over-year. This resulted in a solid cash conversion of 54% in the quarter. For the full year 2025, we expect this cash conversion rate to remain around 70%. Cash flow for Q1 includes 1E's contribution from February and March, and it was impacted by 2 special effects. Firstly, there was nonrecurring cash out of EUR 6.1 million related to the acquisition of 1E. For the full year 2025, we expect this impact to equal around EUR 70 million, as previously said. Secondly, we achieved a settlement in long-standing legal disputes, which resulted in a one-off payment of EUR 11.6 million in the quarter.

In addition, we recorded higher working capital as well as higher interest payments in relation to the acquisition of 1E in Q1. This was partly offset by optimized marketing and lower tax payments due to refunds. Let me remind you that for full year 2025, we will see in total a positive onetime cash effect of around EUR 20 million from earlier changes in our tax scheme. This brings applicable cash tax rate to low-20s in 2025. And as of 2026, the cash tax rate will be in line with the P&L tax rate. I will now give you a short update to our financing on Slide 20.

We are progressing in line with our deleveraging target subsequent to the acquisition of 1E. We have improved our former leverage ratio to 3.1x only 2 months after the acquisition closed at the end of January. Cash and cash equivalents amounted to around EUR 134 million at the end of the quarter. CapEx and the acquisition costs for 1E of EUR 668 million were balanced by our operating free cash flow of EUR 38 million and borrowings of EUR 720 million. As a result, financial liabilities amounted to EUR 1.2 billion and net financial liabilities to EUR 1 billion at the end of Q1.

While 1E related financing has not changed, we were able to further reduce interest rates by around 10 basis points to 3.9%. In addition, we achieved an interest hedge ratio of over 70% to EUR 450 million in new interest rate hedges to reduce the volatility of interest cash flow and interest result. Supported by our strong cash profile and cash conversion, along with our clear commitment to disciplined capital allocation, this positions us well in the current volatile macro environment and will help us to achieve our leverage target of around 2.6x by the end of 2025 and below 2x by the end of 2026.

Let us continue with our financial guidance on the next slide. Let me summarize. The quarter was a good start into the year, and we achieved year-over-year growth in pro forma ARR, revenue and adjusted EBITDA, a notable result in the current volatile and less predictable macroeconomic climate. We expanded our profitability by 4 percentage points year-over-year and delivered a strong pro forma adjusted EBITDA margin of 43%, slightly above our expectations. We recognize that we operate in an environment with increased macroeconomic uncertainties and reduced visibility. Whilst being cautious, we reiterate our pro forma full year 2025 guidance.

For the full year 2025, we anticipate continued top line growth on a pro forma and like-for-like basis as outlined in the table. We expect ARR between EUR 815 million and EUR 840 million, which is between 7.5% and 10.8% growth in ARR year-over-year. We expect the full year pro forma revenue between EUR 778 million and EUR 797 million. This translates to between 5.1% and 7.7% year-over-year revenue growth. Let me remind you that our full year guidance is based on a euro to dollar exchange rate of [ EUR 1.05 ]. If we would calculate the ranges on today's euro-dollar FX rate of [ EUR 1.14 ], this would reduce our guided ARR range by around EUR 80 million and the revenue range by around 10 -- low-teens of millions of euros.

As explained, Q1 revenue exceeded our expectations due to revenue phasing from Frontline. Therefore, when it comes to indicative revenue phasing this year, for the first half of 2025, we continue to anticipate revenues of at least EUR 374 million, as indicated in February. For the second half of 2025, we maintain our expectation of at least EUR 104 million in revenue. We expect pro forma adjusted EBITDA margin of around 43% in full year of 2025. We currently expect a broadly stable trend every quarter during the year between 42% to 44% with a slight uptick in the second half due to higher revenue.

With this, I would like to hand back to the operator to open for Q&A.

[Operator Instructions] And the first question comes from Alice Jennings from Barclays.

If I could first just ask a question on the outlook for Q2. So thinking about what you're seeing in April in terms of any changes in client behavior, do you expect to see a headwind from macro in Q2? And then also thinking about the headwind to ARR growth from the large 1E deal last year, how much of an impact do you expect this to have? And considering these factors, do you expect Q2 to be in line or perhaps slightly softer than Q1? And is there anything else that we should consider there?

And then just the second question, thinking about the launch of DEX Essentials, what's the rough magnitude of pricing uplift that we can expect there for a TeamViewer Remote or a Tensor customer?

Yes. Thank you, Alice. Let me start with the first one. So first of all, we are just getting April in, and it's really too early to quote anything with regard to Q2. Of course, we see, as everybody, caution behavior on the customer end across the regions and across the segments of SMB and Enterprise. But I would call it so far so good with a little bit longer sales cycles, but we are on top of all of the relevant deals. So we are working on that. And of course, June is the decisive month for Q2.

The DEX question...

DEX Essentials, yes, so we launched it yesterday. This is an add-on module. But as I said before, we will continue to do launches. So this is a second step in a series of launches. Stay tuned over the next weeks. And then also the pricing and the offering will be out in the market. We only have an early access program at the moment. So it's not a commercial launch yet, and therefore, price is going to come. Pricing is going to come relatively soon. And as you can imagine, it's a very valuable feature because it's an automation for our customers. So there will be a meaningful uplift to a normal TeamViewer license, but more details to come over the next weeks.

Then the next question comes from George Webb from Morgan Stanley.

A few questions from my side, please. Firstly, just back on the DEX Essentials, particularly for those smaller customers. What's the sales approach there? Because I guess a small business is probably still not familiar with what DEX is? Is this kind of a webinar-based marketing approach? Or what's the way you scale adoption of that solution in as light cost a way as possible?

Secondly, just on the marketing spend now we've run United or run the size of that deal much lower. When we think about this full year, how should we think about the different buckets of spend you now have going on within your marketing line between, I guess, search-based spend versus other categories, that would be interesting. And then just lastly, on cash conversion, when we think about the full year and beyond, what's the sort of ranges we should be looking at?

Maybe I'll start with the last one, cash conversion. George, thank you, by the way. First of all, right now, you saw the 54%, and we are totally convinced to have the full year in the vicinity of the 70%, which gives also a clear indication on the strength of our strong cash profile. You know that because of the multiyear deals for 2026, we think we are rather in the vicinity of 62% to 65%, but that is all mentioned already. So no change.

Yes. Then maybe on DEX Essentials and what's more to come. Clearly, this is targeted on SMB. As you know, our SMB engine is all about the marketing front end, so digital marketing, and it's about e-commerce conversion. And it's about a very powerful and capable inside sales team, which is very sizable and covers our customers globally. So the go-to-market approach for the products around this will be very much as you described. So digital teasing, then there will be webinars or sales trials on the webshop and then our inside salespeople. And then the nature of it, obviously, is to make it so easy to deploy that also smaller customers and smaller teams with less resources can deploy the key essentials of it.

As you rightly point out, if you talk to a smaller SMB, then probably the concept of DEX might not be as familiar. That's why we, in our marketing approach, we basically use interchangeably DEX digital workplace enablement and also automated endpoint management. And one of them is clearly something which resonates with different customer segments of different industries. So that's how we go about it. And clearly, as we all know, customers in general, want less agents, less tools. So there's kind of a consolidation towards platform play. We believe we are incredibly well positioned for that, and that will also be the whole I would say, notion of the marketing concept is to consolidate functionalities onto one platform together with our remote control and access solution. So that's how we work.

Then you had a very specific question on marketing spend. That's nothing we want to disclose more detail than we do. It's a combination of significant awareness building deals like, for example, the deal with the Mercedes AMG team to position our brand in the key verticals for the key use cases. And then obviously, we do a mix of digital and nondigital or half digital components, but we don't want to give a quantified split of these different instruments.

Absolutely. And it should increase sequentially quarter-over-quarter, but it's all in what we plan for the entire year. So we are just indicating you a little bit of different seasonality, not more or less. No worries about margin also.

Then the next question comes from Ben Castillo-Bernaus from BNP Paribas Exane.

Two for me, please. Firstly, just on the 1E stand-alone performance, I think up 12% constant currency, guiding for the year, more like closer to 20%. I know you mentioned you lapped some large deals in Q1. You also mentioned that there's another one to come in Q2. So I guess the first part is, should we anticipate that the 1E stand-alone growth decelerates from that 12% into Q2? And then secondly, regardless of where that shakes out, I think it would imply quite an acceleration in H2 for 1E to get you towards the guidance area. So just helping us what's underpinning the confidence on that?

And then the second follow-up question was just around the special legal disputes impacting cash flow. I think you said it settled. Could you just comment on what that was and if you expect any further cash charge to come in the year?

Yes. Thank you, Ben. Let me start with the last question on the settlement. Actually, that is a big relief for us. I start with the most important part. We don't expect anything else to come. Actually, we know that there's nothing else to come. And this is why it's a relief. I think by the end, by the way, for both parties, the settlement was a big help for us. And you see that there's hardly any impact on the P&L, which means we were catering for that overall these years, we have this now finally out of -- for my friends, the sheet out of the balance sheet. And from now on, we can focus on the real business. So it's only the cash impact, and this is why we also position that right upfront, pretty clear.

Performance, 1E stand-alone performance. Yes, it's exactly as you say, we're lapping some large deals on this on year-over-year growth. And the kind of key parts of the pipeline, both for 1E honestly, and also for TeamViewer over the last years, as you know, and as you've seen in the second half of the year and mostly also Q4, very clearly. And I think, honestly, even in the current environment, it's probably even more pronounced with the uncertainty out there in the market. So I wouldn't expect any major improvements in Q2.

On the contrary, yes, 1E stand-alone, there has been a very big deal in Q2 last year, which will be -- which will be the anniversary. And while that deal is secured for the most part of it, it's a very tough comp to grow on top of it. So I would see on the 1E side, clearly not an acceleration in Q2. That does imply an acceleration in H2, 100%, which is what we have seen and what we have been managing over the last years consistently. So that's just the nature of the Enterprise portion of the business.

And the next question comes from Mohammed Moawalla from Goldman Sachs.

I had a couple. So firstly, you obviously sound pretty cautious around the environment. Could you give us a sense around the kind of the full year guide? Do you feel that perhaps the lower end of the guide is a more reasonable kind of assumption at this stage? And more specifically on Q2, should we expect kind of ARR to potentially a risk of a deceleration further and then a very kind of strong H2? I know you've also got, obviously, the Enterprise business is very seasonal and H2 weighted. So I also wanted to kind of understand against the macro, all the levers you have. So you've obviously got campaigns on the SMB side, you've got some new product introductions. And then there's obviously the whole 1E cross-sell, upsell motion.

And my second question was really around 1E. Could you give us a sense of what the sort of ARR growth looks like in the context of the 12% top line? And how should we anticipate that kind of second half reacceleration? And do you have any specific kind of exposure to U.S. Federal, both in the 1E business or in the TeamViewer business that could be a potential headwind as well to navigate?

Yes. Let me start maybe at the end. So first of all, ARR is not separately disclosed on revenue, and we should stick to that we disclosed almost all and everything. That number one. Number two, on Federal business, it's a low double-digit million number, rough cut EUR 10 million to EUR 11 million, so to say. So the share overall is, of course, in 1E higher, rough cut 20% overall in the total business, rough cut 4% to 5% if you take combined, the overall business sector, so to say.

And with regard to your first question, Oliver, maybe taking the middle one. With regard to are we trending rather towards the lower end of the guidance? Well, really not at this point. This is why we gave a range of the guidance at the beginning of the year for the full year, and we had a good start -- a really good start into the year now with Q1. So of course, Q2 is important and the macro turmoil only started at the end of Q1 or at the beginning of Q2, and we don't see major effects yet in April. So far too early to call either victory or defeat.

And then you had one more on campaigning and other cost elements.

I think second question was on the...

How should we think of the effect of those over the course of the year? Is it more pronounced in the second half?

Yes. So look, I mean, the integration started end of -- beginning of this year effectively. There's quite some stuff in the pipeline in terms of product integrations already for the SMB side. So we'll be able to market it in full swing in a few weeks' time, as I mentioned. So naturally, then there is pipeline build sales cycles for the entry-level enterprise, but mostly for SMB. So this is -- there's a lot of in-year pipeline build and conversion than typically sales cycles 1 to 3 months or so. So that's clearly second half of the year.

On the Enterprise side, cross-sell, we have enabled all the teams. They are talking to customers. We have been out at events. There's good pipeline build, especially in EMEA and Americas on cross-selling. APAC, not yet because we don't have a dedicated team. We're only in ramp there because 1E didn't have business there. And clearly, the pipeline, if you look at the majority of the pipeline that we're building, these are Q4 deals. And hence, we do expect a significant acceleration in the second half of the year, as we've seen with TeamViewer stand-alone before and 1E stand-alone and the cross-sell, obviously, even more so because we only started throughout this year. So from that perspective, on an ARR development, Q2 will clearly be the most difficult one.

Got it. And can I just clarify on the overall ARR, the 7% that you've sort of done, is that still kind of a level you can sort of maintain as you go into Q1? And I appreciate it's going to come down to kind of how the month of June also evolves? Or is there a risk that perhaps that decelerates a bit before we see that big reacceleration in H2?

So for Q2, as you mentioned, because of this big [ VA ] deal, we should not expect an acceleration of the ARR. It's rather for the second half of the year. So this is why we also addressed this proactively. It would be rather a little bit more muted versus Q1, but then from then on, it will grow.

Then the next question comes from Victor Cheng from Bank of America.

[ Number of things ] have been asked already. But I go back to the point on the guidance and the macro assumptions. Obviously, you're thinking that you're probably not trending towards the lower end of the guidance right now. But can you give us some color on how you think about the range, maybe on the lower end, is it maybe worse macro situation that you're thinking about? And then is that layering on top of maybe more slipped pipelines and deals? And on the top end as well, what do you need to achieve to get there?

So I think it's a bit -- honestly, I think it's a bit crystal balling yes. So I mean, we've reiterated the guidance because we believe that the range that we have put out there at the time was reasonable. I think we had all thought at least from my side, at the end of Q4 that things would open up a little bit and the year started first few weeks more promising, but then it turned very, very quickly. And I think our guidance, the bookends of the guidance range, we're already anticipating that when we put it out there, a worsening macro, we had the lower end. And if things are opening up and we see traction on cross-sell to some extent towards the end of the year, then we'll be upper end of the guidance. So I don't think that has fundamentally changed.

What we are not so happy with is that the macro sentiment has changed to the negative. What we are happy with is the speed of integration on the product side and how quickly we are able to add capabilities and functionalities towards the SMB segment -- for the SMB segment. So that's faster than we thought. And also the pipeline build, the cross-sell pipeline build on Enterprise works well. And therefore, in the end, if we look at our own operational performance and what we have under control internally, we are happy with the integration. Macro, we haven't. I think the combination is getting us to a guidance range, which is still as it was last year now with different components and drivers, but the outcome is effectively the same for now.

As Oliver also explained in his presentation, right now, we are really firing on all cylinders, be it fares, be it trade shows, be it speaker slots, wherever, plus all the campaigning like we mentioned, this is across all segments right now, Enterprise and SMB. And we see also pipeline developing. We have big deals there. And in the end, it's very difficult to predict, as Oliver said, what the customers will finally do. But we are firing.

And the next question comes from Toby Ogg from JPMorgan.

Just wanted to come back just on 1E for Q2. I know you indicated we shouldn't expect an acceleration there in Q2 because of the tough comp. But just sort of thinking about the range of outcomes here. Is there a sort of lower line in the sand that we can think about in terms of growth for 1E in Q2 given that tougher comp? And then just on the SMB segment specifically, when do you think we should expect or start to expect to see a reacceleration in that part of the business?

Let me take the second question first, SMB. As Oliver mentioned, now with all what we do, DEX Essentials first, our big campaign, big launch in mid of May. Too early to believe that something will already kick in, in Q2. But first signs, of course, we all hope for that, should be seen in Q3 and then accelerate from there. This is at least what we are up here as a team and stay tuned.

Yes. And first question, 1E stand-alone ARR Q2, appreciate the -- I think it's the third time hearing the question now. I appreciate the attempt, but we will not call that out. Q2 is important. In some markets, regions, this is the year of fiscal year-end for many companies. We have the moving parts in the U.S. Federal Government and overall sentiment. And therefore, let us take the next 7 weeks, push hard and then come with the results. This one is hard to predict at this point in time. And obviously, we don't see any meaningful disaster scenario also coming ahead of us, but I also don't want to give a number.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Oliver Steil for any closing remarks.

Yes. Thank you for your questions. Thank you for joining, and speak to you soon and stay tuned out there in the market with our product and marketing releases as starts to come. And talk later. Thank you. Bye-bye.

Thank you.