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Atoss Software Quality Score: German Hidden Software Champion

Atoss Software Quality Score: German Hidden Software Champion

Assessing Atoss's durability, capital allocation, and future growth potential.

May 20, 2025
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Atoss Software Quality Score: German Hidden Software Champion
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Hey everyone,

Welcome to the forth edition of my quality score format, where I break down all 13 points of my quality score framework for a high-quality business. This way we can quickly assess key qualitative and quantitative characteristics of a business.

Today we'll assess a company on my Watchlist, Atoss Software. The company has compounded well over the last decades and has been a spectacular investment, but how might the future look like?

My Mercado Libre Quality Score post showcases how a full breakdown looks like.

Check out this post if you want more details about the quality score.

Let’s dive in!

A short introduction to the company

Atoss Software is a German full-range provider of workforce management solutions (WFM) with a focus on the retail, manufacturing, logistics, healthcare and services industries. It aims to streamline HR costs and optimize human capital allocation for companies, resulting in good ROI for customers. The company is transitioning to a cloud business model, like many software businesses.

Management Alignment (4/5)

Atoss is led by its founder CEO, who owns 21% through his investment holding AOB Invest. In the past, the founder has sold part of its stake in order to increase liquidity in the shares. There is a short term profit share with modifiers based on operative/strategic and non financial ESG targets. The long term profit share is based on qualitative individual targets and paid in restricted vesting shares. Variable payment accounts for 25-50% of total remuneration, a figure typical for European companies, where you can’t have the same excessive compensation as in US companies. Overall Atoss has a strong alignment with shareholders for the long-term development of the company.

Secular Trends (3/3)

The company benefits from several trends like digitalization of labor, increased regulations and “Fachkräftemangel” (German term for lack of specialized labor) as WFM helps companies to retain employees as well.

Margins (3/5)

Margins have developed wonderfully over the last decade, driving up gross and operating margins, driving high operating leverage. You may ask yourself, why doesn’t this deserve 5/5 then? Well, Atoss most likely is overearning right now as management is guiding for >31% EBIT FY27 margin versus 37.21% right now. This is a result of increased growth investments in the coming years into ventures like Crewmeister, its small business offering. EBIT margins also increased by 1000 bps in the last 7 quarters, indicating that this is not a normal development. Maybe the >31% is conservative and we’ll see continued high margins, but I’d rather calculate declining margins and give a lower score. The FY30 ambition is >35% EBIT margin and indicates a return to (close to) current margins if all goes well.

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koyfin.com (affiliate link for 20% off and a 7 day free trial)

Balance Sheet (3/3)

The balance sheet is pristine with rising cash and basically no debt (6 million euros).

Want the full investing experience?

In the next part I talk about the remaining 9 metrics, going over the competitive advantage, growth, reinvestment, predictability and valuation of Atoss Software. Consider subscribing to Heavy Moat Investments and take your investment research to the next level.

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