Open Letter to Marco Brockhaus, CEO of Brockhaus Technologies AG

A Call for Transparency, Simplicity, and Dialogue

Dear Mr. Brockhaus,

As a long-term-oriented investor and someone who has followed Brockhaus Technologies with great interest over the past few years, I would like to respectfully share a few thoughts, inspirations, and questions with you. My goal is not to criticize, but to offer constructive suggestions that, from my perspective, could help strengthen transparency, sharpen the company’s positioning in the capital markets, and ultimately increase long-term shareholder value.

Let me begin right away with some ideas that I hope you will find helpful:

1) Reduce complexity & focus on clear shareholder value metrics

You may have already come across the recent comments made by Paladin Asset Management in their latest investor letter (https://paladin-am.com/paladin-one/paladin-investorenbrief-q2-2025/). While I don’t agree with everything they wrote, I do strongly agree on one point: Brockhaus Technologies, primarily due to its ownership structure, appears incredibly complex. I believe it would be beneficial to report more metrics on an “adjusted for minority interest” basis. For existing investors, it's tedious to estimate these figures independently – and for new, potentially interested investors, the story may seem too opaque, especially given Brockhaus’s current size. With a market cap of ~€150 million and a free float of only ~€50 million (34%), the company’s narrative is, quite frankly, too complex for its scale.

Closely related to this is the urgent plea to focus on metrics that truly matter for long-term shareholder value creation – in particular, FCF (ideally FCF per share, and here of course “FCF per share available to BKHT owners,” not just Group-level FCF) as well as EPS.

The strong emphasis on adjusted earnings (with adjusted EBITDA seemingly the preferred metric), from which – at least more recently – little translates into actual cash flow, is extremely frustrating for long-term investors.

I’m sure you’re familiar with this legendary quote from Charlie Munger: “I think you would understand any presentation using the word EBITDA if every time you saw that word, you just substituted the phrase with ‘bullshit earnings.’”

2) Communicate better, more often, and more clearly

Recently, I couldn’t help but think of Brockhaus and your role as CEO when reading a tweet by a well-respected – though anonymous – investor who goes by the name Sidecar Investor. The core idea behind sidecar investing is simple yet powerful: instead of leading the investment charge, you ride alongside world-class capital allocators, trusting their judgement, discipline, and long-term vision. In that spirit, many of us are not just buying businesses – we’re backing the people who run them.

The key passage was this:

“How often do they communicate? When they do, is it technical jargon and double speak or are they a straight shooter? Do they set realistic expectations and tell investors bad things they don't have to? There are even clues in how they present themselves, what they wear at conferences, laugh at, and in their lifestyle.”

A major reason I became interested in Brockhaus was your appearance on the Lynx podcast (I’ve actually listened to it three times). My takeaway: he gets it! Long-term thinking, investing in high-quality businesses, being extremely patient and disciplined – very much in line with Terry Smith's philosophy: "Buy good companies, don’t overpay, do nothing."

Unfortunately, communication has deteriorated significantly since then. Especially in more challenging times, it's essential to maintain open communication with shareholders – not to cancel earnings calls altogether, as happened in the first half of the year. Yes, there may be tough questions on these calls – but that’s part of the game. Transparent and honest dialogue is foundational.

If the aspiration is to acquire “champions,” then the communication style should also be champion-like. If Roper Technology is the company’s north star, then let Roper’s communication style be a north star too. That includes acknowledging past mistakes – always! – and clearly outlining current challenges and weaknesses.

Here’s the full tweet for reference:

3) Investor Day 2025/Early 2026?

The last “Technology Day” was held over four years ago. Building on the previous point of improving communication, I would strongly encourage you to consider organizing an “Investor Day” – ideally later this year or in early 2026 – to clearly communicate the long-term vision, reduce perceived complexity, and introduce key leaders across the portfolio.

Take Bastian Krause at BLS Bikeleasing Service GmbH – a highly competent, personable founder. What is his long-term vision? How does he see the partnership with Brockhaus evolving? Let’s also hear from the executives at Probonio. Give IHSE its own strategic segment presentation.

This would also be the perfect venue to explain your ongoing strategic investments in more detail:

“As part of Bikeleasing’s ongoing transformation from a ‘single-product’ to a ‘multi-benefit’ platform, Germany’s second-largest bicycle leasing provider expects significantly higher personnel and other operating expenses in fiscal year 2025. The increased expenses are primarily attributable to strategic growth initiatives, in particular the rollout of the digital multi-benefit platform Probonio.de and the development of the used bicycle platform (Bike2Future.de), which was launched in 2024.”

How large are these investments exactly? How much is being allocated to personnel, product development, or marketing? What portion of these rising costs can be classified as growth investments versus recurring operating costs? How long do you expect these growth investments to remain elevated?

Again, this ties back to the second point: investors are forced to speculate – they shouldn’t. FY 2025 guidance suggests significantly lower margins (on an adj. EBITDA basis; I expect minimal profitability on an actual cash flow basis) – but what long-term FCFa2S (FCF available to BKHT shareholders) margin level do you believe is achievable over the long term?

Finally, regarding the growth investments in Probonio and Bike2Future: the question of opportunity cost arises. Assuming these are true growth investments and structural profitability is indeed higher than what we’ll see in 2025 (to quote from a previous blog post I wrote: “And when you think about my estimated steady-state FCF margin of 17% for the Brockhaus group, this additional profit has a disproportionately large impact. Using a simplified base-case of €30 million in FCF to Brockhaus, this €9.6 million addition boosts FCF by almost 30%.”), then Brockhaus is trading at a 4–6x multiple of FCF, which corresponds to a 16–25% yield.

That’s the benchmark your opportunity cost must be measured against – assuming you share my margin assumptions of course. That’s an immediate return with a very high degree of visibility. As John Huber recently wrote on his blog:

“Compounders are largely more expensive these days, but when a stock trades at a 20% FCF yield and is buying back shares, it has the same per share compounding potential as a 20% ROIC company that reinvests all earnings.”

4) Additional questions:

• Why was the new fee model for bicycle dealers not publicly communicated?

• What is your stance on Paladin Asset Management’s proposal to sell IHSE and focus the group fully on the Employee Benefits business?

• What exactly were the €1.6 million in costs related to the inbound M&A review?

I remain a committed and engaged shareholder – and I sincerely hope this letter is received in the spirit in which it is intended: as thoughtful feedback from someone who believes in the long-term potential of Brockhaus Technologies.

Kind regards,
René Sellmann