Esprinet S.p.A. (PRT) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Esprinet First Half 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Giulia Perfetti, IR Manager and Sustainability Manager. Please go ahead, madam.

Thank you, Madam. Good morning, everyone, from me too, and thank you for joining us for the Esprinet Group H1 2026 Results Presentation. I'm Giulia Perfetti, Investor Relations and Sustainability Manager of Esprinet. And with me here is Giovanni Testa, CEO of the Group, who today will comment on the results. Before we start, please note that this presentation contains forward-looking statements. So I would like to draw your attention to the regulation note on Page 2 regarding the information contained within this document. Today's call is being recorded, and the podcast will be posted on the Esprinet website in the Investors section together with the presentation. I will now turn the call over to Giovanni to begin presenting and commenting with you on the H1 2026 results. Giovanni, over to you.

Thank you, Giulia. Welcome also from me. And I think that we can start with the H1 2026 result of Esprinet Group. The overall picture of the first half of '26 confirm our strategy, the solid results reinforce the momentum that we will build from the starting of the year. The second quarter, I have mentioned the strong performance of the first. And this allows us, and this is the first news that I would like to underline with you, a solid outlook for the second half and led us to raise our 2026 guidance to adjusted EBITDA of between EUR 77 million and EUR 82 million. So the maximum, the previous guidance that we announced in May now is the minimum of the guidance [indiscernible] gross sales grew 8% year-on-year, exceeding EUR 2 billion in the half. Also in the second quarter, the Iberian Peninsula remain our engine is the market that is more growing in our, in the region in which we are present. And once again, delivering a double-digit growth. On the contrary, the market is growing, but low single digit. And the trend of the market in the second quarter in Italy is more or less the same of the first quarter. So we are in a market that started to grow, but not as we would like to see and what not like is we are seeing in the Iberian space. Demand is driven primarily by the infrastructure, artificial intelligence, memory and storage. And this is a trend that started in the last month of last year and is continuing also today. We see a little shortage of components, but we see also a very important increase of the unit average selling price overall speaking about smartphone, notebook, tablet and servers. The first 3 categories are related to the space and related to our -- of the business that we manage under our brand V-Valley. In PCs, overall, what we have to underline is that the decline in unit shipment was more than offset by rising the average price. But for sure, we see a number of units sold that is less is important number, important respect to what is the business of PC notebook at this moment. Green Tech sustained the remarkable growth that we had in the first quarter. And not is the main -- the main aspect for us is that our strategy to grow to push a lot in these product categories and in renewable energy is a win strategy in this moment. Turning to profitability and about the financial structure. The EBITDA Adjusted for the first 6 months of the year was at EUR 31.9 million with an increase of 27% compared with the same period of 2025. And also the incidence on the sales rising to 1.53% from 1.30%. This result is supported also by a gross profit margin of 5.79% and also from our capability to keep all the fixed and variable costs under control. And this is another aspect that is important in our strategy because we are trying to grow in sales and in gross margin, gross profit, keeping under control the cost and reducing the impact of the fixed cost on the turnover. The cash conversion cycle is closed at 25 years -- 25 days, sorry, 1 day better than the first quarter and 4 days better than Q2 2025. The net financial position is negative of EUR 325 million and is flat if you see the comp period of June 2025 and is better of more or less EUR 25 million, EUR 30 million of March 2026. ROCE stood at 6.3%. So at the end of the day, what we can see is that we are growing in sales and we are growing overall in EBITDA margin that for sure is the most important -- more important. And we have maintained a solid financial structure. So all is the reason why we decided to increase the guidance EUR 77 million to EUR 82 million. If now we look, thanks, Giulia, to the H1 and Q2 '26 sales evolution, the messages are more or less the same that we discussed and we shared in the first quarter. We have outperformed the market in all the region in South Europe in which we are present. Overall, in the Peninsula Iberian that is the country that is leading the way. Spain grew 18% in the second quarter and 21% in the half, the market grew less, as you can see in the picture. So we beat the market. Portugal is continuing increasing its market share, and we are doing more than the market up to 62% in the quarter and 37% in the half. For Morocco, we didn't have data of the market, but what we can say is that it is still small in absolute terms on the total of our turnover, but increase of 20% the sales year-on-year. Italy rebounded in the second quarter with gross sales up to 8% in H1, we are exactly increasing exactly the same percentage of the market. The group grew 4%, broadly in line with the market over the half. As we see into the product categories, the double-digit market growth in the quarter was driven by the performance of the [indiscernible] Personal System, what we see in the product category screens. Solutions and Services grew of 15% in the quarter and 15% (sic) [ 13% ] in the half and the screen of 4% and 9%, respectively. Device, that is a product category that last year was in crisis in this year are growing of 8% in the second quarter and 4% in the half 1 2026 ahead of a market that was down in both of the period. We closed about, speaking about product categories with the Green Tech remain our fastest growing area with up to more or less 40% in the quarter and 40% in the half that confirm our strategy, that confirm our capacity to grow in all the months of the year. It's not a spike in one moment and then with resulting on the line in other month and confirm also our strategic role on renewable energy and energy efficiency technologies. For sure, Green Tech is the part of the result of Vamat, our last acquisition in October 2025. [indiscernible] to customer, IT reselling -- IT resellers were the main engine of our cluster of customer and are growing 8% in the quarter and 13% in H1. Retailers and e-tailers were down 9% in the quarter. Here, we want to already maybe answer to some questions that could arrive later. We decide not to take some business that under the profitability and working capital point of view were not in our vision good to take. We want to create value, not to destroy value, and we are not following the turnover just to have a better figure in the top line if the result is not reflected in the EBITDA margin. And so we decided not to take some business in the retailer and e-tailer space. Passing to the next one. Here, we see the profit and loss of H1 and Q2 by the [indiscernible] that represent our go-to-market [indiscernible] V-Valley, Zeliatech. As you can see all the figures are positive. Some comments that we have already done a few minutes ago. What I have the pleasure to underline is the performance of the services. If you remember in Q1, we had services figures that decrease of more or less EUR 0.5 million for a spot deal that we had in the previous year, not in 2026. But you can see the performance of the services in after the announce of our new division in Q2. So after the announce of our new division in [indiscernible] At the end of March 2026. We are very focalized on services. We are pushing a lot. And in Q2, we increased over 41% of the turnover and 56% in EBITDA margin. It's clear that are small numbers of turnover in our global turnover, but with a gross EBITDA margin of more than 50%, also a small increase of turnover represent a good impact in our total EBITDA margin. Another aspect that we want to underline as we have told before, Zeliatech with increase of 40% of the turnover and 57% of the EBITDA margin with EBITDA margin that grew more than 20 basis points. Another aspect that we want to underline is the increase of the turnover of the screens, which, for sure, there is the impact of the increase of the average selling price of notebook and smartphone but also the good performance in respect to the previous year of the devices if you see the H1 result of the EBITDA margin, EUR 3.1 million against EUR 0.3 million with a delta of EUR 2.8 million, more than 100% of increase. Also in the product categories, [indiscernible] we have changed the profile of our business. We have decided not to grow on in some categories of product, and we are pushing a lot on the market in which we can see an EBITDA margin higher than in the past. In the profit and loss summary, we see the good momentum of the EBITDA Adjusted and EBIT Adjusted turnover for gross profit, we have already commented what happened. We see about the SG&A cost that are growing 4% in H1 and 7% in Q2. The main reason are related to personnel cost because I remember that the perimeter of the group was not present in Q1 and Q2, Vamat, for example. There are renewals of the collective bargain agreement that both in Italy and Spain with a percentage that are important. For the other costs are under control in line with our expectation with the 2025 result and the percentage of the [indiscernible] About EBITDA and EBIT, we have to underline in Q2 is that for the first time, there is a difference between EBIT and EBIT Adjusted, but also EBIT Adjusted, because in Q2 included some non-recurring cost that related to the termination of the relationship with our former [indiscernible] At that time. And 3 managers of the group, one in Italy, one in Spain and one in Portugal that left the company during the Q2 2026. About the financial as the cost of the net financial expenses is the impact as we have already seen in Q1 of the not favorable dynamic of the euro-dollar exchange. On the contrary, the other financial costs are in line with the last year. We are speaking about EUR 2 million. In addition [indiscernible]. At the end of the day, net income increased by over 40% in the half. And you see the decrease of the net income in Q2, but it is all related to the non-recurring cost that I have explained a few minutes ago. Speaking about the balance sheet summary, there are 2 aspects that are the main focus of the group since a lot of quarters. The first one that you can see in the right side of the slide is related to the operating net working capital. You can see that in the total operating net working capital is in line with the result at the end of June is in line with the result of '25 because we are speaking about EUR 428 million against EUR 417 million, you see an increase of the inventory and also increase of trade receivable that is connected to some deal that we have decided to do because connected to the continued increase of the prices, we have decided to have the products already in our warehouse for the H2 for the back-to-school in August and also the campaign September to December that I remember. I remind you that the 4 months in which we have to create the majority part of our EBITDA margin of the year. And so we have decided to prevent the increase of the product to have some products available with the better price of the, maybe the competition of our competitor for our customer, we have decided to anticipate some deals. Speaking about the net financial debt that you can see in the left part of the slide, even if we have done this deal and we anticipate some purchasing deals with the vendors, the net financial debt is fully stable because we are speaking about EUR 325 million of debt in 2026 against EUR 328 million in 2025. That is also connected to a grew of more than 8% on the turnover. So in this moment, we are confident that also our hard work about the inventory management is offering us a good result and a good demonstration that our strategy is in this moment a win strategy. Here, we see the working capital metrics for the average of first quarter or the figure that we see in this slide are the same of the next one. Seeing the average of first quarter, we are passing from 29 of Q2, at the end of Q2 to 25. So we are increasing the result. We have a better result of 4 days of 1 day respect the Q1 2026. If we see in the next slide, if we see the year-end quarter metric, also we see 4 days of better result for Q2, so June '25, June '26 and a decrease of 3 days, so more than the 1 day of the average of the last quarter from Q1 '26 to Q2 '26. ROCE stood at 6.3%, fully in line with the result of Q1 '26 -- and a little decrease of Q2 '25 that was 6.6%. So final remarks, the geopolitical scenario is changing every day, as you can read in the newspaper or the websites. Every day, we have a news that could be a good news or a bad news. And the 2 (big wars, big crisis) we are speaking about Iran and Ukraine every day offer us a different scenario that can change the visibility of the next month. For sure, all that these aspects are creating issues on supply chains, the cost pressure, the price pressure, the price increase on the product. The cost pressure overall related to transport and to energy aspect you see perfectly the increase of the cost of the oil. So it is an issue that can have some aspect related to the control of the fixed cost and [indiscernible] of the company. There are also some issue about the project time lines because some companies we are speaking about product company are looking for started a new project and they want to see which will be the future. And we have, we still have as in the Q1, some promise related to the public tender. We are talking about public tender and so on because even if the vendors are trying to enlarge the time in which they can grant the price to [indiscernible], there is still is an issue because in the past, we were in a market in which the price decreases the and the visibility for the tender with the public administration was 3 years for the price. Now it's not possible to have the [indiscernible]. The ICT distribution market is growing. It's growing with different percentages country by country, but all in all, is growing and was driven mainly by the, as we have already said, demand for infrastructure, artificial intelligence, software cloud, cybersecurity and for sure, for the PC segment that as we have already said, see lower unit volume offset by the average price that is increasing more. So we can confirm another moment that our strong performance of H1 is a demonstration that we think the good strategy that we started some years ago with the 3 divisions, Esprinet, V-Valley, and Zeliatech with the decision to enter in renewable energies with the decision to have a push more than the past on services and data center solution is in this moment because we can comment the results since today. But also in our forecast and the reason why we increased our guidance. We have, we are positive and we think that we can have a long-term growth also in the next quarters because our market and our strategy as well will permit us to grow -- the guidance the new one is EBITDA Adjusted of between EUR 77 million to EUR 82 million. And we will work as in the past to arrive in the high part of the [indiscernible] as we have done last year. I think that I have finished my side and Giulia and I team up for the Q&A session.

[Operator Instructions] First question is from Pietro Nargi, Intermonte.

2 questions on my side. The first one is on the Devices segment. As you already said before, there was an improvement in both revenue and profitability. I was wondering if this trend could be, let's say, sustainable also in the second part of the year? The second question is on the V-Valley. We have seen, again, a solid growth on this segment. If you could provide us more color -- more color on your, let's say, expectation for the midterm. So if, let's say, the high single-digit target year-on-year, it's a sustainable trajectory for the next few years?

Okay. Thank you. So about the Devices segment, we think that in our strategy, the result of Q1 will be possible to reach also in H1 will be possible to reach also in H2 and also in the next year. The result is related, as I have mentioned before, decision not to manage any more some of that categories that enter in Devices. And also there is an aspect that I'm happy to comment with you that to our own brands performed better than in the past and all brands in our division of the turnover entered in device segment. So the answer is yes, we see more or less the same trend also for H2, and we are forecasting also for the next year. About V-Valley, V-Valley is one of the pillar that is present our strategy. Also in the V-Valley space, there are a lot of product categories that altogether created the result of V-Valley. Some product categories are growing a lot. And also in the future for our point of view, the trend sector of the market. We are speaking about overall software and cloud that are mixed because there is no difference between box and cloud in this moment, so on-premise on cloud and overall cybersecurity. There is also an of artificial intelligence agents that is starting, not showing 100% in the results of H1, but it's starting. And we are, we have signed some contracts with vendors of agents as we have, as I told you in interviews to the financial community in a lot of interviews in the last month about artificial intelligence and about the agent. We are developing some agents internally. And also, we are signing some contracts with our vendors to distribute agents that are done by other companies. What is the common point by, for the 2 strategies is that we are testing the agents internally before to put in the market. To offer to our customers because we want to be sure that are working well because artificial intelligence is a space in which a lot of people are speaking. I'm not sure that all are knowing perfectly what they are saying, we can say in this way because I wanted to be polite. And so we want to test to be sure to offer to our customer agents that are working in the right way. Speaking about, again, about V-Valley, there is also another aspect that are important for us is the market that is related to server [indiscernible] also connected to the artificial intelligence, the needs and the performance of the servers necessary to manage the AI artificial intelligence are growing a lot. So we have to offer to the market servers with the capability with the power, but higher in a very important percentage of increase of the power of the servers. So there is a market in which we will see in the future some needs of change of the that are present now in the data center. And so it's another opportunity for us. I hope to have well answered you if you need some other comments, please tell me.

Next question is from Mathias Paladino, TPICAP.

I have a question, maybe more, maybe related to one on the working capital. So the cash conversion cycle improved to 25 days, but we remain above your 21 days, if I remember well, ambition. And while factoring and securitization programs increased to EUR 402 million. And what concrete progress can be made on working capital in H2? And should investors expect that higher EBITDA guidance to translate into stronger cash generation this year? And maybe the second question is on V-Valley on the margin. So if we compare it to the last year, we were at 4.75% and now we are at 4.35%. And so what drove this small, let's say, dilution? And should we view it as a temporary mix effect or maybe the appropriate margin level for the current growth environment?