<a id="bm-comp-fe328ab0-d064-433e-b8b3-7a9ea57ac686" name="bm-comp-fe328ab0-d064-433e-b8b3-7a9ea57ac686" class="BMCustomAnchor"></a><table><tr><td bm-component-id="fe328ab0-d064-433e-b8b3-7a9ea57ac686" style="vertical-align: top; width:100.000000%;"><ul><li>Demand for cybersecurity and cloud remains strong</li><li>Germany is the most challenging and slowest growing market, as is the case for many other</li><li>Margin expansion continues and we should expect M&A activity</li></ul></td></tr></table><a id="bm-comp-f075a09d-2e87-41b0-873d-266321fd6b88" name="bm-comp-f075a09d-2e87-41b0-873d-266321fd6b88" class="BMCustomAnchor"></a><table><tr><td bm-component-id="f075a09d-2e87-41b0-873d-266321fd6b88" style="vertical-align: top; width:100.000000%;"><h3 class="bm-h3">Demand remains satisfactory overall</h3><p>Last week we hosted a fireside chat with Proact's CEO, Mr Jonas Hasselberg. Mr Hasselberg made a solid impression and, in our view, shared a positive view of the market dynamics. In general, Proact is experiencing an accelerating market and growth rates above historical levels. Geographically, Germany is currently the most challenging market, not declining, but growing the least, according to Mr Hasselberg. This is in line with what we are hearing from several IT peers, including German listed companies Bechtle and Cancom, for example. In terms of the cloud market, Proact sees good demand for its own cloud solutions and private clouds, which continue to account for the majority of cloud revenues, and which we believe should also carry a higher margin than selling cloud space from third parties. Cybersecurity and AI have been two hot topics in recent years, and although we expect AI to be more of a future driver, cybersecurity is currently driving demand. Proact has been successful in backup and disaster recovery, for example, and among the most prominent cybersecurity providers, Mr Hasselberg mentioned Microsoft and Arctic Wolf.</p><h3 class="bm-h3">Margin expansion to continue and M&A may be imminent</h3><p>Proact has successfully increased its margin in recent quarters, helped by the cost reductions made in 2023, and while system sales continue to be lumpy and have a short-term impact on quarterly profitability, the underlying trend continues to be upwards towards the target of an 8% EBITA margin. One driver, apart from organic improvements, is the acquisition of more service-related businesses that Proact can 'productise' and extend its current product portfolio to new customer bases. These targets typically have higher consulting margins of 8-12%, which will help the mix over time. Mr Hasselberg also said that he definitely expects M&A to happen, although 2024 has started off slower than expected, as price expectations for sellers remained somewhat elevated. This has changed since the summer and Mr Hasselberg said that Proact is now active in more discussions and spending a lot of time on them. The current share buybacks don't limit M&A opportunities as Proact is still operating with a net cash position.</p><h3 class="bm-h3">What keeps Mr Hasselberg up at night?</h3><p>In terms of potential challenges, Mr Hasselberg said he was most concerned about potential cyber-attacks. It's difficult to protect against and you can't fully prepare for it. But it's a double-edged sword, because on the other hand it drives Proact's business. We expect continued top-line momentum with positive organic growth in H2'24e, supported by the recent NetApp and Dell reports and easy comps from 2023. Combined with improving margins, earnings growth should be solid and could be boosted by an acquisition before the end of the year. The stock currently trades at 9.7x 2024e EV/adj. EBITA and 9.1x 2025e.</p></td></tr></table><a id="bm-comp-7fb629a2-1ee2-4210-b954-4b3084b75168" name="bm-comp-7fb629a2-1ee2-4210-b954-4b3084b75168" class="BMCustomAnchor"></a><table><tr><td bm-component-id="7fb629a2-1ee2-4210-b954-4b3084b75168" style="vertical-align: top; width:100.000000%;"><table id="bm-img-a74f3fc3-4047-407e-9deb-47e568b67da4" class="bm-img-table xslt-img-empty xslt-img-include"><tr><td class="xslt-img-caption">Organic growth</td></tr><tr><td><img bm-img-encrypt="a74f3fc3-4047-407e-9deb-47e568b67da4" bm-img-original-height="457" bm-img-original-width="793" bm-img-svg="image:image_upload/81549_8a062a1e-998f-49d8-8308-486fb31c29ab.svg" bm-img-width-hint="72.63%" id="bm-id-a74f3fc3-4047-407e-9deb-47e568b67da4" src="https://abgsc.bluematrix.com/images/image_upload/81549_8a062a1e-998f-49d8-8308-486fb31c29ab_528.png" svg="/nas/web/clients/abgsc/images/image_upload/81549_8a062a1e-998f-49d8-8308-486fb31c29ab.svg" width="528" alt="" title="" /></td></tr><tr><td class="xslt-img-source">Source: ABG Sundal Collier, company data</td></tr></table></td></tr></table><a id="bm-comp-37715c9d-9fe9-4329-a6a4-8a7a07c861f1" name="bm-comp-37715c9d-9fe9-4329-a6a4-8a7a07c861f1" class="BMCustomAnchor"></a><table><tr><td bm-component-id="37715c9d-9fe9-4329-a6a4-8a7a07c861f1" style="vertical-align: top; width:100.000000%;"><table id="bm-img-0a280071-0b75-4398-b6b4-a8a12c7b48ff" class="bm-img-table xslt-img-empty xslt-img-include"><tr><td class="xslt-img-caption">Sales and adj. EBITA margin</td></tr><tr><td><img bm-img-encrypt="0a280071-0b75-4398-b6b4-a8a12c7b48ff" bm-img-original-height="482" bm-img-original-width="793" bm-img-svg="image:image_upload/81549_2621224e-c95b-4405-9a81-c36103eb88d3.svg" bm-img-width-hint="72.63%" id="bm-id-0a280071-0b75-4398-b6b4-a8a12c7b48ff" src="https://abgsc.bluematrix.com/images/image_upload/81549_2621224e-c95b-4405-9a81-c36103eb88d3_528.png" svg="/nas/web/clients/abgsc/images/image_upload/81549_2621224e-c95b-4405-9a81-c36103eb88d3.svg" width="528" alt="" title="" /></td></tr><tr><td class="xslt-img-source">Source: ABG Sundal Collier, company data</td></tr></table></td></tr></table><a id="bm-comp-af9b2a63-7ba4-4091-8f32-bd317cbe0feb" name="bm-comp-af9b2a63-7ba4-4091-8f32-bd317cbe0feb" class="BMCustomAnchor"></a><table><tr><td bm-component-id="af9b2a63-7ba4-4091-8f32-bd317cbe0feb" style="vertical-align: top; width:100.000000%;"><table id="bm-img-dc57dacb-682e-4d98-aacc-b1a4752b49ef" class="bm-img-table xslt-img-empty xslt-img-include"><tr><td class="xslt-img-caption">NTM EV/EBITA vs peers</td></tr><tr><td><img bm-img-encrypt="dc57dacb-682e-4d98-aacc-b1a4752b49ef" bm-img-original-height="445" bm-img-original-width="793" bm-img-svg="image:image_upload/81549_01533687-6f29-44b7-92cc-c1776e8ec559.svg" bm-img-width-hint="72.63%" id="bm-id-dc57dacb-682e-4d98-aacc-b1a4752b49ef" src="https://abgsc.bluematrix.com/images/image_upload/81549_01533687-6f29-44b7-92cc-c1776e8ec559_528.png" svg="/nas/web/clients/abgsc/images/image_upload/81549_01533687-6f29-44b7-92cc-c1776e8ec559.svg" width="528" alt="" title="" /></td></tr><tr><td class="xslt-img-source">Source: ABG Sundal Collier, FactSet, peers: ATEA, Dustin, Bechtle, Cancom</td></tr></table></td></tr></table>