Asseco Poland S.A. (ACP) Earnings Call Transcript & Summary

[Audio Gap] To our call today to review Asseco's full year 2022 financial results. My name is Joanna Paczkowska, and I'm responsible for Investor Relations at Asseco. Today's conference is also attended by Karolina Rzonca-Bajorek, Asseco's Vice President and CFO. [indiscernible] for results meeting summarizing our operations and financial performance in 2022 will be as always divided into 2 part. In the first part, we will go through the extracts of our results presentation. The true version is posted on our website under [indiscernible]. Moreover, on the screen above window with the slides, you can see a small [indiscernible] filed. The second part will be, of course, dedicated to Q&A session. If you have any questions, you can write them in the chat room at any time during our meeting. So let's start with the presentation. Last year was a very good year for Asseco in financial terms. Revenue, operating profit and net profit for the full year all recorded all-time [indiscernible] highs. During 2022, our revenues grew by 20% to PHP 17.4 billion, out of which 77% came from sale of proprietary software and services. Non-IFRS EBIT was up by 14% to PLN 2.0 billion. Non-IFRS net profit grew by 6% to almost PLN 550 million and IFRS net profit grew about by 8% to [ PLN 500 trillion ]. Despite uncertain times, we continue to consistently pursue our strategy based on the development of proprietary software and related services as well as strong geographic, sector and product diversification. The international nature of our organization and its federated structure, which makes a great deal of autonomy and freedom of actions to individual companies allow us to compete effectivity on foreign markets, while maintaining at the same time, flexible and local approach, to say, so necessary for our clients. In 2022, 16 new companies operated from the European, Israeli and American markets joined our Group. Since our own IPO on the Warsaw Stock Exchange in 2004, the number of our acquisitions has already reached nearly 130. This brings the Asseco Group today to near 33,000 employees in 60 countries on 6 continents. During the previous year, we recorded double-digit sales increases in all business segments. 90% of revenues were generated on international markets through Formula Systems and Asseco International segment. In Asseco Poland segment, we improved sales by 10%. We recorded higher sales to central institutions. We cooperate with many important public institutions in Poland such as the Social Insurance Institution, National Health Fund or Matrix that is our [indiscernible] media and finance. There are several other agencies leading to [indiscernible], which is also reflected in the presented numbers. We also want to emphasize strong sales performance of our subsidiary. Asseco Cloud which focuses on providing cloud services and contact the company that is billing with cyber security issues. When overall, this segment is concerned, we increased sales by 23% due to double-digit sales growth in all Formula subgroups. Companies from this segment are developing dynamically in Israel as well as on the foreign market. The working cause to strengthen the position in Europe and in the U.S. but also in South Africa and Asia, is their organic growth is supported by acquisitions in [indiscernible]. In 2022, Formula completed 11 M&A, 8 on Israel market, 2 in the U.S. and 1 in Europe. Commenting on Asseco International segment, which grew by 15% year-over-year, which would then provide good financial performance of our ERP subsidiary concentrated in Asseco International and Enterprise Solutions Group in all major markets in which they operate. I mean by that Poland, Slovakia, Czech Republic, [indiscernible] region and [indiscernible], which is also [indiscernible] very good performance of Asseco South-Eastern Europe, which reported increase in sales in all operating segments. Payment, which is known under the ground Payten as well as in the area of funding and dedicated solution. In the lower right corner, you can see how our sales by these segments have been growing nicely over the last 5 years. Our revenues are highly diversified [indiscernible]. In our operations, we identify pre-mine taxes, banking and finance, general business and public institutions. We recorded sales increases in all these sectors. In the reported period, banking and finance sector accounted for 33% of our sales, general business sector for 42% and public institutions for 25%. In next slide -- in the previous slide, in the bar chart on the right, you can see how our sales by sector have been growing forward than last 5 years. In banking and finance sector, our revenue grew by 14%, the highest growth by 25% was observed in our Asseco International segment, mainly due to strong results of Asseco South-Eastern Europe in the payment area in all business lines. We also recorded an increase in revenues in Asseco PST, which operates in Portugal and in Portuguese-speaking countries of Africa. Homeland [indiscernible] segment grew by 10%. [indiscernible], the leading mobile provider of Asseco Solutions for the insurance industry has strengthened its position on the European market, which accounted for 49% of its sales. And after a weaker 2021, it reveals its position in the U.S. Revenues from the American market accounted for 42% of the company's total revenue. Record grading revenues were reported by Magic Software. The results achieved in Poland grew by 10%. We are implementing long-term development and maintenance agreements and constantly looking for new opportunities. We are implementing 3 big projects related to transformation and implementation of central transactions with [indiscernible]. We continue to expand our cooperation with [indiscernible] bank in Poland in [indiscernible] bank. Moreover, in the analyzed period, a set [indiscernible] service. All contracts concluded as part of by [indiscernible] implemented by Asseco in 2020 are processed in the Asseco systems. The second core banking platform, which is an important element of [indiscernible] is dreading solutions that have impactful returns in the [indiscernible] area and takes into account Asseco accounting scheme. Asseco system of [indiscernible] in after-sales customer service. The service is provided in the subscription model. In General Business sector, sales increased by 25%, and highest growth by [ 21% ] of mighty Formula Systems segment. In face of this segment, we observed high growth rate in Matrix IT, Matrix software and instant staffing. That group company acquired in April 2021 was also a contributor to the sales growth. Asseco International improved revenues by 16%, mainly thanks to higher sales of Asseco South-Eastern Europe as well as higher sales of our ERP solutions in Asseco Enterprise Solutions Group. Group sales results were also generated by our Spanish company. In Asseco Poland segment, you can see across 3% decline, but it should be matched this is because of the high base FX, one-time sale of third-party licenses to our main client, Asseco Business, also good growth in the comparative period. If we were to compare our core activity in, I mean sale of proprietary software and services, the revenues would be higher than last year. We also reported good sales results of our subsidiaries in dealing with transition to the cloud of our clients. This subsidiary assets as the name shows, Asseco Cloud. In public institution sector, sales grew by 20%, were mostly indicated growth by 30% was recorded in Formula Systems and segments. The biggest contributor to the reporting growth were Matrix IT and Magic Software. The [indiscernible] segment grew by 14%, mainly due to accelerated digitization of government and health care unit is a mother company. Higher sales of cyber security revises but also due to the higher sales of cyber facility services in our [ statutory ] content. Asseco International segment, we recorded a minor decrease in revenues on a year-on-year basis. Asseco [indiscernible] was dealing with the public administration sector mainly in the [indiscernible] but also in Slovakia due to [indiscernible] political situation. Additionally, we carry out a difficult contractor, which makes the result slightly worse but is treated at a life where we view the brand of a stable supplier. We think that this too, could be a positive strategy in the future, Asseco shows a stable supplier in difficult times, we managed a stable supplier in a difficult time to benefit from our reputation. In this context, actually flat results in the entire of the Greater National segment should be considered and reported results. We are satisfied with results achieved in full year and Q4 alone. As I mentioned at the beginning, our revenues on top [indiscernible] and bottom line are the best in our history. In the previous year, after 20% growth, our sales reached over PLN 70 billion. From this 20% -- this growth -- 20% growth around to organic growth, acquisitions were responsible for 20% of the growth and the rest was due to FX changes. For the assessment of our financial standing and development prospects,-- it is important to look on non-IFRS number. And after non-IFRS adjustments in full year and non-IFRS operating profit amounted to PLN 2 billion, which means an increase by 14% compared to the same period last year. Year '20, '21 were exceptional for us in terms of profitability. Thus, 0.6 percentage point decline in year-over-year non-IFRS operating profit is not a surprise for us. So that this level was expected by us and we perceive satisfactory. Non-IFRS net profit attributable to the shareholders of Asseco Poland for 2022 was higher year-over-year by 6% and amounted to almost PLN 550 million. Reported IFRS profit for shareholders was equal to PLN 503 million, and it was up by 8%. The overall growth rate of non-IFRS net profit 6% versus non-IFRS EBIT, 14% results from our sales mix and more dynamic growth of prices where we do not consolidate 100% of the results, mainly this relates to company from Formula Systems segment. The non-IFRS operating profit of the Asseco Poland segment, which is particularly fully consolidated on the bottom line and for which, there is no FX changes, increased by 5% in 2022. To sum up, we perceive this increase of the success is in such an unstable market environment. In 2022, we managed to cash in 76% of the [indiscernible]. It must be remember the growing businesses involve more and more working capital, hence [indiscernible] were ceasing of cash and working capital. Our inventories are growing, but we are analyzing the inventory turnover ratio. For the collection of receivables, we do not see anything allowed in any of the segments. Represented level of cash flow is in line with our expectations and this natural [indiscernible] of our business is growing. We have a stable liquidity position. As of the end of December, the level of cash exceeded PLN 3.8 billion. When commenting on that level, the majority of which looking at the group level is located in Formula Systems segment, I would like to point out that 81% of our debt is based on fixed rate, which is very important, taking into account current market environment. Net cash in the Group was equal to PLN 2.3 billion. Net operating assets amounted to PLN 3.1 billion, out of which, over PLN 1.6 billion came from Formula Systems segment [ PLN 770 million ] from Asseco International segment and [ PLN 666 million ] on a Asseco Poland segment. Asseco Poland is relinked to this company's paying dividends consistently. Our civil position, financial position allows us to do so. In 2007, we have paid nearly PLN 3 billion in dividend. This year, the Management Board recommended dividend payment in the record amount of PLN 291 million, which means PLN 3.15 million per share and is equal to 58% of the Group's consolidated net profit. From the very beginning, we have been focusing on providing customers with proprietary software in the software and solutions, which accounts for approximately 80% of our revenues year-by-year. We produced top-quality software, which supports key business processes accompanying all key market [indiscernible]. We want to maintain the leading position in our strategic sector. I mean banking, insurance, telecommunications, health care, utilities and public administration. We also want to grow in product segments in ERP, payments and trust services. The war in Ukraine has confirmed the importance of cyber security. As a provider of solutions for property solutions and companies, we've been -- we have taken an active growth in procuring IT systems and helping our customers adapt their interest and infrastructure and considers to the new reality. We also have few [indiscernible] and [indiscernible] plans when it comes to the cloud solutions market. We want to be actively involved in the construction of the European cloud computing and the establishment of a company called Asseco Cloud in 2021 was the first step in this direction. We continue to impulsively promote the [indiscernible] concept, transferring our clients and our processes to the digital space. We also work on artificial intelligence solutions. We believe that the growing popularity of AI tools is not the path, but the direction of development of technology, which is intended as self-driven. And now last not least ,our backlog. In the area of proprietary software and services with the currently signed contracts worth PLN 9.8 billion. In fixed rates, our current [indiscernible] is also [ PLN 10 billion ]. You have the word in mind that in 2022, in Formula Systems segment, we sold a company named [indiscernible], which added nearly PLN 180 million to the 2022 backlog. In turn, in the Asseco International segment, we sold 2 Danish companies, [indiscernible] and Asseco Denmark, which added over [ PLN 100 billion ] to 2022 backlog. Moreover, I would like to point out that the way of calculation of back in Matrix IT, the biggest contributor in Formula Systems segment has changed for more conservative one, equally counted only the gain growth of the backlog. The growth in fixed rates would be equal to 3%. So this is all from my side. Now we can go to Q&A session. I encourage you to write the questions because at the moment, I see no questions. All right. So if there are no questions, thank you for your participation, and we invite you for our Q1 results in May. Thank you so much. And feel free if you have any additional questions to contact our IR team. Thank you so much for your attendance. Bye-bye.