Growens S.p.A. (GROW) Earnings Call Transcript & Summary

So good morning, everyone, and welcome to our usual full year 2025 comment call. In the present chart, you have speakers for today and myself, there will be Mr. Monfredini, our Co-Founder, Chairman and CFO; and Mr. Gorni, who is Co-Founder and CEO of the company. And we'll walk you through the main financials and a few comments about Growens and our subsidiaries' perspectives. I would now leave the stage to Mr. Monfredini. And bearing in mind that if you have any questions or comments, you can send an e-mail at the present Investor Relations address, [email protected]. You're very welcome to submit any questions or comments. And as usual, the present presentation will be recorded and published on our website shortly afterwards. And thank you so much. I will now leave the stage to Mr. Monfredini for the comment on the latest financials.

Thank you, Micaela. Good morning, everyone, and welcome to the earnings investor call to discuss our full year 2025 results. Despite deeply unstable economic and geopolitical landscape throughout 2025 and early 2026, our management team successfully maintained a flexible strategy. This focus on innovation allowed us capture growth opportunities and deliver the guidance shared with the market. So let's dive straight into the income statement. We closed the financial year with consolidated revenues of EUR 77.4 million, representing solid 4% increase compared to 2024, almost EUR 3 million in absolute value. This top line was driven by a robust performance across our segments. On one side, our SaaS component led by Beefree grew by an impressive 17.4% to reach EUR 40.8 million, plus 22% without exchange rate effect. While our CPaaS business, Agile Telecom grew by 2.8%, reaching EUR 61.7 million. It's also worth noting that our international footprint remains exceptionally strong with foreign revenues accounting for 73% of our total revenues. Other revenues decreased from EUR 1.9 million to EUR 0.9 million due to the reduction of some one-time activities grant income related to the disposal of ESP business to TeamSystem. If we exclude variation in other revenues, we can see an increase in business revenues of 5% or EUR 3.7 million. Moving down the profit and loss, I'm extremely pleased to highlight the material improvement in our operating margin. Our consolidated EBITDA has returned to positive territory at EUR 2.5 million, a significant turnaround from the negative EUR 0.1 million reported last year. This recovery is rooted in our gross profit, which expanded by nearly 16% to EUR 20.5 million, lifting our gross margin to 26.5% on revenues. This was achieved because our cost of goods sold remained broadly stable at EUR 56.9 million despite the increase in revenues. In terms of operating expenses, we deliberately increased our sales and marketing investment by almost 15% to EUR 6.6 million, specifically to fuel Beefree's growth. Meanwhile, our research and development operating and general admin costs were carefully managed and slightly decreased compared to the previous year. Overall, research and development costs remained almost stable. Further down with an 11% increase, we recorded EUR 4.4 million in amortization and depreciation, mainly tied to EUR 3.6 million of amortization of capitalized research and development costs and approximately EUR 0.5 million of IFRS 16 related amortization. As a result of our EBIT improved significantly by 55% to negative EUR 1.8 million. And due to the positive net financial results, we closed the year with a consolidated earnings before taxes of minus EUR 1.7 million. Consolidated net results amounted to EUR 2.3 million. In 2026, consolidated taxation has a significant impact on results due to the higher margin and lower tax credit in Agile Telecom principally related to Patent Box. Analyzing the income statement of the individual business units, you can notice that while both Beefree and Agile Telecom increased their margin of approximately 50%, Agile Telecom was the primary driver, sustaining the overall margin with almost EUR 3 million. Let's move on the balance sheet. Turning to our balance sheet. Our financial structure remains extremely solid. Total assets stand at EUR 56.4 million supported by a total equity of EUR 31.4 million. Looking at noncurrent assets, which totaled EUR 20.9 million, the main components are EUR 8.5 million in goodwill and EUR 6.9 million in intangible fixed assets. On the current asset side, we grew to EUR 35.5 and you will notice an increase in trade receivables from EUR 9.4 million to EUR 12.4 million related to Agile Telecom. This 31% increase is tied to some specific working capital movements, particularly within Agile Telecom. Total current liabilities remain well managed at EUR 21.1 million, of which EUR 11.7 million are trade and other payables. Finally, let's examine the net financial position. We maintain a very healthy liquid profile, boosting a positive net financial position over EUR 11 million compared to EUR 13 million at the end of 2024. If we look closely at our liquidity, our total liquid assets and cash equivalents amounted to roughly EUR 15.5 million. On the debt side, our medium and long-term financial debt has significantly reduced, dropping by 58% to EUR 0.8 million, while our short-term current financial position sits at EUR 3.5 million. Also, our net financial position includes a notional debt item of approximately EUR 1 million due to the IFRS 16 accounting principle for leases and rent. Additionally, it's important to note that a customary guarantee related to the previous sale of our ESP business to TeamSystem accounts for approximately EUR 1.2 million held in escrow, which is reflected in the adjusted net financial position. So the anticipated decrease in our overall cash position is primarily attributable to 4 factors that bridge the gap between our previous and current figures. Firstly, a EUR 1 million cash payment for our scrip dividend; secondly, increased strategic investment in sales and marketing; thirdly, an increase in the group VAT receivables. And lastly, working capital dynamics specific to Agile Telecom as mentioned before. Finally, I would like to share with you the main KPI of Beefree business unit. Let's move on the current slide. Annual recurring revenue, as you can see, grew by about 11.2% without exchange rate effect, reaching USD 17.8 million. Gross margin remains in line with best practice in SaaS market at 83% compared with 80% in 2024. The EBITDA margin, while still negative, saw a 58% year-over- improvement, reaching minus 7.9% of total revenues. Net revenue retention has been confirmed at 97%. And that's all from my side. Thank you for your time. If you have any questions, I'm here.

Well, thank you very much. I suggest to leave the questions at the end. And so I will now pass it on to Nazzareno for an overall business commentary. Thank you.

Thank you, Micaela. So let's start with Beefree. As shown by Matteo, Beefree EBITDA was negative last year. And as for our 3-year plan will be negative also for the coming 2026 year, and this will be the last year of investment according to our 3-year plan. The investment goes to mainly R&D and marketing and sales. So in terms of R&D, which is the biggest investment that we are doing. As you know, we have 2 different products. We have a Beefree SDK and Beefree for e-mail designers. Regarding Beefree SDK, which is the largest part of the Beefree revenues, the main investment is around the MCP, so Model Context Protocol, which is a way that allows our tool to be used and integrated by other agents. So this allows other developers to develop agents -- AI agents that can play with Beefree SDK and use Beefree SDK without human intervention. And this is an important development. And today, we already released a beta version of the Beefree MCP already used by more than 40 clients. We are collecting a lot of feedback, and we are working to improve even more our MCP in order to be able to release the first 1.0 version within the year. Anyway, the product is already available for all the clients that ask -- that could ask for -- to access the beta program. Then we have several other developments, very technical developments. For example, the one -- important one that we released this year is the ability to run the Beefree SDK within a shadow environment, which is a sort of protected space into a browser. And this allow, for example, Beefree to be integrated within Salesforce -- the Salesforce application much more easily than before. Then if we talk about Beefree for e-mail designers, the main development is around agent that will assist the designer on the side and will be a sort of coworker that is able to perform activities, improvements, editing, applying styles. So as a junior assistant on the side that can do simple task, but also quite long ones just with a prompt. And this is also in alpha version. So we just released this agent to a very small subset of clients. So it's a private beta. And as long -- as we collect enough feedback, we will release public beta also on that. Those are the main developments that are ongoing right now. We also released some -- a lot of smaller features, for example, new languages, new wrappers, so new improvements that could allow enterprise clients to start faster with Beefree SDK and also not only to start faster, but also to be able to manage let's say, the merging of Beefree SDK within the application more easily and with more control that this can allow to have lower risks and more control of what happens in Beefree SDK. But more on that will be available, I think, in the next 3 months. Regarding Agile Telecom, the other business unit we have, as you can see from the numbers, the profitability improved a lot, and this is due to the improvement of the platform and to the routing algorithm that is the secret sauce of Agile Telecom. In terms of wholesale traffic, which is the largest part, I think that we will not be able have further improvement of margins. So now we are investing on the direct side of the business instead of indirect and which is an area where the margins are historically higher. So the smaller are the clients, the higher are the margins. This is a part of the business that is very small compared to the wholesale business. And we are working to do some R&D investments in order to explore ways to increase the number of direct clients and also the margin. I think that's all from my side. Open for questions.

Thank you very much, Nazzareno. We have a very first question for -- from various investors, which is, can you give us some more flavor about the impact of AI and how it affects both the industry and Beefree specifically?

Of course, AI has a huge impact. We see a lot of start-ups that are popping up with simple tools that promise to build an e-mail template from prompt, so from prompt to template. As far as today, the results are not really good. So for now, I don't see this as a huge threat to our sales process, let's say. So for now, especially because we are now moving upwards into the mid large enterprise, it's not something that is affecting our go-to-market. Of course, we are following this trend because I believe that in the future, those systems will become more and more able to create something that is meaningful and with better quality. And that's why we are also developing our own agent that will do exactly that, so assist the customers also being able to create a template from scratch from a prompt. It's important to highlight that I don't believe that the fine-tuning or the final adjustment of the message could be done -- I believe that for the fine-tuning will be important to have still e-mail editor when the user will be able to adjust the small details or change of text, change of word, change of image by himself manually and not through a prompt because we know that fine-tuning through a prompt is always quite a mess and it is to change everything. So I think it's still important to -- at the end to have an e-mail template editor as Beefree. So that's why I don't believe that even in the mid to long term, the overall business model will be too affected. And in terms of Beefree SDK, the AI explosion is an opportunity because through our MCP, now we are able to have a bigger audience. So we are not only selling to the regular clients, but now we are selling to new start-ups and new clients that are using and are developing agents on their own and the Beefree SDK is able to connect with those. And on top of that, there are also several new companies that are starting since the barriers to entry to develop software is lower and lower, the potential market now is wider at the end.

I would add -- let us remind our listeners that Beefree SDK currently represent 2/3 of Beefree sales. So it's a huge opportunity, notwithstanding that the human factor will be central to bringing on the development of your product portfolio. I would now switch to a further question concerning the business plan. So what is your level of confidence in reaching the targets that were previously communicated to the market?

Well, as for now, we confirm our guidance. In terms of EBITDA and marginality, it's easier to predict because it's more under our control. In terms of sales and ARR, of course, there are more challenges because also for the geopolitical situation, there are a lot of uncertainties. So as for now, we don't see any signal that can make us revise those -- this outlook, but let's see what's coming in the next few quarters. It's too easy to tell -- it's too early to tell.

Yes. Thank you so much for this. And we remind everyone that in case we foresee any material changes in the guidance, that will be our duty, but we will take care of updating although we see no signs for that necessity straight away. Another question concerning the Rule of 40. So how do you expect it to be balanced going forward considering your -- well, the updated strategy and AI-related factors that we just mentioned?

Well, the overall strategy to reach the Rule of 40 is basically to increase revenues while keeping the cost base stable. And this is what we are doing this year, and we will be doing also next year. And so as long as we are able to reach the revenue targets, I think the path to the Rule of 40 is already defined. Of course, if the AI will change the market scenario and also the revenue projections, we will need to adjust also the cost side in order to be in line with this Rule of 40 target.

And thanks so much. And let me underline that it is evident from full year 2025 financial statements that a big action in that direction is being performed in terms of cost control, especially direct costs and the healthiness of gross margins and gross profits. So there is a question. There is a hand raised from Arianna. I'm quite not sure whether she can type a...

Arianna...

Yes...

Okay.

Yes, I'm able -- I saw Micaela was free, so. You can hear me well. So I would have a follow-up on Agile Telecom. So we know -- we are aware of the cash cow nature of the business. So my first question would be if you could quantify the R&D investments you mentioned during your speech. And then second, if you could share our volumes moving now? And what are your expectations in this sense for the full year?

Yes. In terms of revenue expectations, we -- well, Agile Telecom, the last quarter of Agile Telecom was very good with a performance that was higher than our expectations. And the first quarter is in the same line, so higher than expectation. But I would not say that this could be replicated also in the next quarters because Agile Telecom business is quite volatile with depends of the volume that are coming from our clients that are resellers of traffic. So it's really difficult to have a confident revenue prediction on that. So we remain, let's say, conservative. And so we hope that we will continue to grow as fast as it is growing, but we are not sure that this can happen. In terms of R&D -- additional R&D investment on the Agile Telecom side, I'll let Matteo maybe share the numbers.

Yes. In 2025, more or less EUR 1 million in research and development. And maybe we will continue also in 2026.

Thank you very much. Any further questions? Okay. Let me remind you that you can still submit any questions or comments at the e-mail address, [email protected]. That's all for today. We thank you for being here and remind you that recording for this call will be uploaded on our website as usual. And again, thank you, Matteo, thank you, Nazzareno, and thank you, everyone, for participating today.

Thank you.

Thank you everyone.

Bye-bye.

Have a nice day. Bye-bye.