Moltiply Group S.p.A. (MOL) Earnings Call Transcript & Summary

Good afternoon. This is the conference call operator. Welcome, and thank you for joining the presentation of Gruppo MutuiOnline First Half 2023 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Marco Pescarmona, Chairman; Mr. Alessandro Fracassi, CEO; and Mr. Francesco Masciandaro, CFO of Gruppo MutuiOnline. Please go ahead.

Thank you, and welcome, everybody. As usual, we will rely on the document that has been uploaded on our website, and we'll start this time from Page 17, with the H1 highlights. And here -- overall, we are pleased with the results of the first half. Revenues are EUR 197.1 million. That's up 25.5% year-on-year. EBITDA is EUR 52.4 million, and that's up 13.2% year-on-year. And then we'll see the contribution of the 2 divisions later. The EBIT is EUR 34.8 million, and that's down 4.5% year-on-year. By the way, this is compared to the evolution of the EBITDA due to the purchase price allocation exercise of Trebi that was completed in the first half. So we had amortization of the software that was allocated. And then, finally, there is net income that is EUR 19 million, down 31.7% year-on-year and this is driven by the evolution of the EBITDA and by the interest -- the financial part, you know we are paying quite a decent amount of interest this year. The EBITDA margin in the first half is 26.6% and that compares to the EBITDA margin of 29.5% of the first half of 2022. Just as a reminder, the first half of this year is not completely comparable with the first half of last year because we made 2 important acquisitions. One is Trebi, which is made in the BPO division and the other is a set of international companies of the Broking Division. If we had not done these acquisitions due to the decline of the mortgage market, we would have seen negative evolution for both revenues and EBITDA in the first half. To understand better how the business is evolving, we have also provided the Q2 figures. And you can see in Q2 on the operating figures, the growth was stronger than -- year-on-year than in Q1. Also in Q1, there is 1 month leasing of the international broking businesses, but even with that, we did see some acceleration. So revenues are EUR 103.2 million in Q2 2023, and that's up 30.4% from Q2 2022. And the EBITDA is EUR 28.9 million and that's up in Q2 2023, and that's up 16.1% compared to Q2 2022. And the EBITDA margin is 28% in the second quarter of '23 and that compares with 31.5% in the second quarter of '22. Looking now -- going into more detail before going into the performance of the divisions and the business lines, let's make a couple of comments about the Italian residential mortgage market. And, overall, the market was contracting significantly since, say, September, October of 2022. And the decline was quite significant in particular in Q1 of '23 and as a result, the decline in Q2 of '23 is possibly even worse and we have a drop of gross originations. This is actual market figures -- this is the actual mortgages of 46% year-on-year in April, 34.8% in May and 41.7% in June. And, by the way, this is in a situation in which we are back to some remortgage volumes. So there is, today, some demand for remortgages of people switching from variable to fixed. So there, in recent months, we are seeing growth year-on-year actually for the market. But the big surprise is that purchase mortgages are down 40% year-on-year, which is, by the way, worse than what we would have expected. And, today, if you look at the leading indicators like credit bureau inquiries, we continue to see figures around 20%, 25%. And so we expect to see a continuation of this decline. In fact, we were saying before that we could see a recovery in the second half of the year, slightly better performance. But Q3 is possibly not so promising. Of course, Q4 was completely impacted last year by the interest rates and was already significantly down. So for Q4, the comparison will be much easier. So certainly, we will keep that effect. But apart from that, it remains today a weak market with no particular sign of consumer demand improving. The -- let's say, the positive is that there is some remortgage demand still with the usual problems of the banks not wanting to do these mortgages are not so much. But there are people that want to see the -- value the right mortgages and nothing on our door or on the markets for -- to try to at least fix them. So this is something that was -- that is a positive in a situation which, in general, is not particularly bright. So this is in mortgages. One important thing to say is that, today, mortgages and we provide the figures of the breakdown of the revenues by business line at the end of the year, but mortgages are certainly -- mortgage-related businesses are no more than 30% of the revenues of our entire Group and the same is true looking at the separate divisions. So despite the fact that this is Gruppo MutuiOnline, but we always comment about the mortgage market. Today, especially because mortgage business has declined, this is only a minority portion of what we do. And in fact, we still have, despite a very difficult mortgage market, a good performance because we are a highly diversified business today. Now, going back into the divisions. On Page 20, we have the figures of the Broking Division. The Broking division is up in terms of revenues to EUR 89.2 million in the first half of '23. That's a growth of 32.7% year-on-year. The EBITDA is EUR 28.2 million. So that's a good growth of 11.4% year-on-year. And of course, the EBITDA margin is down. So today, it's 31.6%, and it was 37.6% the year before. But we know that the growth to a large extent is still by -- actually, the growth is due to the consolidation of the international businesses. And you also remember that those companies used to have a margin -- an EBITDA margin which was much lower than our standard EBITDA margin. So there was a margin dilution, and this is true even if, you know year-on-year, those companies perform better than where they were in the hands of the previous owners. And so this is the performance of the Broking Division. You see the EBIT for the Broking division follows more or less the same evolution of the EBITDA and because this is -- there are no particular news in terms of amortization or anything below the EBITDA line. And if you look at Q2 in isolation, on the next page, you see that the performance is even better. And we are doing EUR 47.9 million of revenues, up 45.3% year-on-year. Again, this is because we -- mostly because we changed the consolidation area, of course. But still, there is a better performance in Q2 than in Q1. And EBITDA is, in Q2 of EUR 15.9 million for the Broking Division. And the EBITDA margin is 33.2%, which is higher than the EBITDA margin for the entire half, for the first half. In terms of where this performance comes from, we had a very strong [ lag ], which is the negative performance of the credit market. And so the mortgage or market caused a significant contraction of our Credit Broking business line, and we expect, by the way, this to continue to happen at least till Q3, and then you have to see some stabilization in Q4, both as of the better year-on-year accounting in the -- hopefully [ regional ] basis. Insurance broking is a bright spot because inflation is helping it. And so we continue to grow in the first half, and we expect to see growth in the second half as well. Let me remind you that Insurance broking is Italian Insurance Broking. Telco & Energy Comparison is also a bright spot. We have quite a strong year-on-year growth. And this is because we are selling more and more energy contracts. And this is, by the way, because we see not a favorable situation of demand and also the impact of all the improvements that we have made to how we operate the business, since the acquisition of SOS Tariffe. And so -- and we expect growth here also in the second half of the year. This remains an industry, a sector, where there is a big problem of reselling by aggressive telemarketers. So you know, over -- there are lot of operators that pretend to be a comparison website on aggregators, but instead they are like a lead generators that then try to sell aggressively contracts that are not in the interest of consumers, and this is not positive for the industry. We hope that sooner or later, someone will intervene. And then there is E-commerce Price Comparison. Here, we had growth in the -- of the first half, but we also see some signs of a slowdown in the second half. I think it's the impact of a slowdown in consumption. So this is a mild impact, but still, we are going from growth to a no-growth or maybe minus something, but like -- it's more in line with what you'd expect to happen with GDP or consumption for the country. And finally, the International Markets, this is where we are -- going to put in terms of comments in reporting revenues, et cetera, where we are putting the international businesses that we acquired. These businesses are mostly dealing with insurance products. And there is globally a lot of inflation in insurance premiums. This is helping clearly demand for comparison services and intermediation services. So this is a positive. Consumers are switching more. And also we have continued to apply our best practices and little by little, you see that things are having an impact. And so for these 2 reasons, I would say, we are delivering good performance in these businesses and we expect this to continue for the second half of the year. And we will -- for the same -- because of the same drivers basically. And with this, I'm done with the Broking Division. So I'll let Alessandro continue.

Yes. Thank you, Marco. So we are on Page 23 with the highlight of the first half of the year for the BPO Division. As you see revenues have grown from EUR 89.8 million to $107.9 million. That's a 20.2% increase year-on-year. At the EBITDA level, it was a little smaller. The growth was 15.3% from EUR 21 million in the first half of '22 to EUR 24.2 million in the first half of this year. The EBITDA margin decreased from 23.4% to 22.4%, so not a significant decrease, but some of it, but yes. The EBIT margin decreases by -- decreased 20.5% year-on-year from EUR 14.8 million to EUR 11.8 million. This is actually a decrease that is complete -- well it's basically completely due to the impact of the [indiscernible]. If you add them back, it's more than EUR 5 million, and therefore, the trend in this would be very similar to the one of the EBITDA that will show a grow double digits, between 12% and 13%. So basically, there is really no significant information in the decrease of the EBIT margin. It's just the impact of the purchase price allocation. If we -- just looking at this H1 numbers, I want to stress again what Marco said that -- first of all, that the growth is basically due to the acquisitions. But at the BPO level, there would have been anyway growth at -- even with a constant perimeter in terms of revenues. It would have been some percentage point like we saw in the first quarter. And, again, this is a seriously complex year for the credit market, not at the level of 2012, but still very, very, very hard year. And in this -- against this background we believe that the Group and the 2 divisions and the BPO division have shown a very resilient business, thanks to a very diversified business model at this point. So we are particularly proud of these results. Now if we look at Q2, you see that the trends are similar. Here, there is a late impact of a change in the consolidation perimeter, meaning in Q2, it would [indiscernible] was already -- 2022 was already in the perimeter. So this is -- you cannot really do a lot of reasoning comparing to Q1. But anyway, if you look at -- when you compare them to the same period of the previous year. And if you compare to Q1, you see that more or less the numbers are not that different. And as we have said, when we were commenting Q1. So -- which is kind of the same message that we'd like to give, barring significant changes in the environment, we do expect that in absolute numbers, the -- at a consolidated divisional level, H2 2023 will be similar to H1 2023. So first half of the year, there will be obviously the quarterly seasonal trends, but the reporting EBITDA margins and in revenues, we will not see significant differences. But it's fair to say, as I said that there will be very different dynamics at the level of the different business lines. And so starting from the news, obviously, Mortgage BPO business is hit by the environment and the market, as Marco commented, is going down more than 35% relative to last year. And obviously, is affecting our -- also our outsourcing operations. Anyway, the -- our decrease especially in the half what you see in the market. And this is probably also from 1 client, but we have clients are [ depleting ] less. But the other part, which will continue in the second part of 2023 is the fact that we are seeing a -- as also Marco commented, that a restart of growth relative to last year of remortgages. These are the people who change from variable rates to fixed rates. And you remember that in our mortgage BPO business, we have also have para-notary services. And so we are seeing the growth of those para-notary services and a business mix changing relative to last year when we said they were at a bare minimum. This is good in terms of revenue, not as good in terms of margin, meaning that the margins of this business are -- percentage-wise are significantly lower, and this is a viable cost, so it's not a worry. But obviously it has a -- it will have -- it has had and it will have a dilution effect on our margins for the mortgage BPO business line. Good news in the medium term, I think I already commented on that before the summer, but we are -- the commercial pipeline is interesting. We confirm that we have acquired 2 new customers. Obviously, the impact will not be seen this year and probably we'll see it more clearly next year where we also hope to see the market bounce back from the 10-year lows that we're seeing at this moment. Anyway, for the Real Estate Services BPO business line, we are seeing a double-digit revenue growth compared to H1, 2022. And this is all basically related to the enlargement of the consolidation area, the acquisition of Europa Centro Servizi and Sovime, which are, you might remember, 2 companies that had basically important services in collecting information for real estate properties, mainly for the MDI market. The outlook for H2 is stable because we are still seeing a significant run-off activities for the Ecobonus-related activities. Now obviously, these are in runoff. So they won't go forever. And so 2024 will obviously see at a certain point, a decrease in these activities. But we don't foresee an impact -- a significant impact for 2023. So we are actually positive for the outlook for this business line and looking at the end of the year at the end of 2023. Loan PO business, it's one of our most stable business lines. It's always been growing high-single-digits. Actually, this half of the year is the result, we're looking at low-double digits. And this is obviously also year-on-year, so relative to the first half of 2022. This is thanks to the strengthening in the area of subsidized trade. We won a contract with one of the big agencies [indiscernible] efforts for small and medium enterprise company to invest abroad. And so we expect that this trend continues for the second portion of the year. Insurance BPO, it's, at this moment, a bright spot. We see a very strong growth in turnover. But part of it is due to an increase -- to the acquisition of the Onda Group, which we acquired basically in June of 2022. So for this first half of the year, we still see the impact of the change in the consolidation perimeter, but there is also significant organic growth. And this is basically due to -- I mean, if you've been reading the news in Italy of being significant weather phenomena that have affected the -- especially the north of Italy the Northeast and also the large cities, Milan too, and that brings a lot of appraisal activities related to the assessment of the damages of these weather phenomenon. So it's happening in the spring months, but also during the summer. So I know it's not nice to say, but this obviously helps our business. And so this growth for the organic part will continue also for the second half of the year. In Investment Services, instead have seen a drop in revenues. This is due to the difficulties, obviously, of the asset management industry in a period where interest rates are rising and you can buy [indiscernible] bonds and generate a decent return. So obviously, our clients that sell investments in open funds or open market funds here are a little -- in difficulties and they see a decline in the new flows to their asset and with a reduction of these [ MCCRs ] impacts also our revenues. Finally, we have had an excellent performance of the Leasing & Rental BPO and IT business lines. This is obviously due to the impact of Trebi. But even if we take that away, on a like-for-like basis, the growth of our existing businesses and one of Agenzia Italia, it would have grown high -- I mean, moving to those double digits, close to 20%. Thanks to basically the gradual normalization of logistics in the automotive market and the fact that any way our clients, the rental companies, the leading companies now know how to deal with it. They are -- the way they interact with their final clients is much more normalized even if there are still difficulties, but they are able to [ forget ] better, able to promise better and leads to more satisfaction in their services in their clientele. And so we saw a positive impact that impacts obviously also our services in Agenzia Italia. And this is something that will continue, so we are positive. So basically summing it up, the mortgage business and the investment services business are decreasing, especially in the mortgage business, but all the others are going up both organically and for the impact of acquisition. And so we remain confident of delivering seasonal results also for the second half of the year. And again, I believe that this is a very, very proud message for our shareholders. Thanks. To you Marco.

Thank you, Alessandro. We will conclude with some comments on the net financial position. On Page 28, we have the evolution of the net financial position since December 31, 2022. And basically, we went from, in terms of statutory net financial position to negative EUR 195 million, which is a debt of EUR 195 million. Then, at the end of January, at the beginning of February, we acquired the international companies of the Broking division and clearly absorbed significant cash and so we went to negative EUR 326 million. And now, at the end of June, we are at negative EUR 332 million. Now, you have seen that our operating performance in the quarter was actually quite satisfactory. So -- and I'll make a couple of comments on why we generated a satisfactory operating performance. We have a net financial position that is not improving at the end of June, and the answer is seasonality of working capital, which we had last year and also we had in the past, mostly linked to Agenzia Italia. You know Agenzia Italia and those [ extend ] custom duty payments on behalf of its clients. And for operational reasons, the way that works the best to do this is, that we amass the money and then we have refunded right away, so in a week or 2. But this is a lot of money. And this is -- and in Italy, they have certain dates and there is one date that is in June that is at the end of the quarter. So we have a significant absorption of cash to pay the dispute and then we have significant receivables corresponding to these advances, but this closes normally quite rapidly. And so anyway, so this is nothing extraordinary. We are back to the usual working capital cycle. And so the impact is this one. And also just as a reminder, in June in Italy, you pay -- it's a month where you pay the balance of your tax bill and the advance of the tax paid for the year before -- for the following year. So -- and we also have to pay the final installment of the, like the substitute tax for the asset revaluation that we built 2 years ago, yes, exactly. This year, we paid the third and final installment in June of the substitute tax to pay for the revaluation. So all the being said -- sorry, and financing, you will see it in -- we are going to publish [indiscernible] later today, tomorrow, I don't know, the financial report for the 6 months. You'll see this in the notes. Also we have increased the liability for the put and calls and disclosing to the financial position for some of some minority shareholdings impacting Agenzia Italia, which is doing, as Alessandro said before, very well. We increased our forecast. And of course, the increase of the forecast also entails a greater expected liability. So we decided to do this adjustment. And on the [indiscernible] in the 6 months. This is also relevant. So I would say this is likely to be -- if the business continues to perform well, this is likely to be the peak financial position, then it need to decline and also if you do the numbers, et cetera, we shouldn't be -- we should be below -- slightly below in the estimate to make 3x EBITDA at the end of the year, of course if we were very close a little bit flexibility to -- in a number of ways to deal with it. One of the flexibilities by the way, comes from the investment in MoneySuperMarket, which we are quite happy, but these are some investment. So if we needed a little bit of money for an acquisition or because we need EUR 5 million to reduce the net financial position. This is I think that, look at that. There is no particular desire to do. It's just flexibility. And as June 30, our 44 million shares in MoneySuperMarket were worth EUR 139 million. I think today is a little bit less. But we should do the net financial -- net of the value of an investment, which is by the way almost all our banks look at our net financial position. This is up 2x EBITDA more or less. So it's super comfortable. So this is -- this is all the comments that we had to make on the net financial positions, and I will close the presentation and start with the questions. So operator, please go ahead.

[Operator Instructions] The first question is from Aleksandra Arsova with Equita.

Three questions from my end. The first one is on the mortgage side. So as far as I know, we submitted the government imposed technicalities behind the mortgage incentive for young people which were contributing for an interesting amount last year. So do you believe these adjustments are working or do you expect them to work and still contribute positively into the mortgage market in the coming quarters? Then the second one is a short one on the PPA, Purchase Part Allocation. So what was the exact amount in the quarter, so more the [ listening ] quarters. And then on the M&A, so as far as I understand, you are quite happy with the acquisitions in France and Spain. So maybe some follow-on on it, what was the management undertook to improve the marginality, the profitability? And what do you expect in terms of target EBITDA margin for the acquisitions in the coming years?

Okay. Yes, thank you, Aleksandra. So let's say, the [ mortgage insurance ], they are becoming more structural. By And the way the government said that the new tax on the interest margin of banks was justified at least to some extend by the desire to find exactly incentives -- sorry, there is some background noise. So the tax on -- the new tax on [indiscernible] tax on the interest, as you know of banks was supposed to fund exactly these measures, of course, it will fund many different things. But clearly, it's something that the government believes in also probably because it's something that could have an impact in terms of popularity. And I wouldn't -- certainly, the measures are becoming better, stronger, more structural. Today, we don't see any particular impact. I would say in general, there a positive thing. But today, there is, sorry, nothing else to restart demand. So positive but not [indiscernible] but in a way, it's good you know if these majors [indiscernible]. I think we included all [indiscernible] to Alessandro...

Hi, Marco. If you want, I can comment on this. Basically, the impact for the first half was around EUR 5 million for Trebi, Europa and Luna. You can expect like a jump considering this [indiscernible] in every year and in every quarter from now on. No, no, [indiscernible] the international markets acquisition.

Yes, the PPA for the international acquisitions will be done by the end of the year, so the impact in the final quarter. If you want to make an adjustment not only for the EBITDA amortization of recent acquisitions, but for all the acquisitions we are including the figure in the 6 months report. So as soon as it is published, you will find it [indiscernible] can tell you when it is, so it's easy to find the amount that's sitting on the topic. And in terms of the companies that we acquired, I mean it's still early, I would say, companies with a strong market -- strong market position, which is never a good thing to say, but let's say, companies with a strong brand, that operate in the market of comparison intermediation. Say, the first company in the sector in the country should be easily have -- should be able to achieve an EBITDA margin north of 30%. This is what we see in many countries. So I think that's something we can for say, for a company like Rastreator, which is really a strong brand name in Spain. Of course, that requires a lot of efficiency, a lot of improvement, scale. But it's something that is a very reasonable ambition level. In other markets that are less mature, which could be France or Mexico, you know there is a little bit more uncertainty on what is achievable. So the focus is really on strengthening the businesses and working -- difficult to make the market mature by yourself but it's possible to give a little bit of contribution. So it's also a game of patience there. So improving what we are doing, but also being patient and we've been patient and helping to shape the market. So 30% not be easy, but maybe 20% would be a very legitimate ambition. But again, we don't know yet, we will foresee how we'll close the year and then have an idea of where we can get for the future.

The next question is from Filippo Prini with Kepler.

A couple of quick questions. First, within the business line of credit broking [Audio Gap]. Can you give some thought about the Insurance broking and in [indiscernible] market continues line of the comparison? Then moving to another hot topics. First, is there any other stake where there are minorities where it could be a breakup or write-down of the value of the put/call option? And lastly, is it correct that maybe after the end of the semester, you have largely trimmed your stake in the MoneySuperMarket.

Okay. Sorry, can you just repeat the last question on MoneySuperMarket?

Yes, if I look on the financial website on MoneySuperMarket, that today you are currently with 8.02% stake. I believe that maybe in the past month, the stake was marginally higher. So just a confirmation if you have tremendous stake or it's unchanged?

Okay. Okay. Let's start from MoneySuperMarket. MoneySuperMarket is still the same stake that we have 44 million shares. We are the same December -- at the end of December 2022. Actually, the last shares we acquired at that time we communicated, passing the threshold was around November -- in October, November 2022. And since then, we've retained. And in the other questions, is there any reversal. So the valuation of the put/call options, we tend to do the exercise once or twice a year. In theory, it really gets better. Lercari could also be a business where there could be some adjustment. Alessandro was saying that the company is benefiting from the claims, the lots of claims that come from weather events of the past months. The question is also is this structural? Are we going to have extreme weather events next year as well, which would have an impact? Or is it more of a passing effect. So we would like to think about this, the companies where we have -- there are 2 sizable companies where we have a put and call liability. One is Agenzia Italia, and the other is Lercari. So these are the 2 sources of potential variations to the liability. Okay, then continuing -- to go back to the other question, credit broking, yes, we didn't comment for a number of reasons. A couple of years ago, we decided to merge MutuiOnline and PrestitiOnline, the 2 companies in mortgage broking and consumer credit booking. And we now report it together credit broking. But I could say that you know in consumer credit business, really we don't see the steep contraction so far. We haven't seen the steep contraction that has characterized the mortgage market. Here, clearly, it's not -- this is a business that suffers anyway from the fact that consumers maybe are a bit conservative today, but also it potentially suffers if lenders become very conservative and tight on credit. I would say, we haven't seen so far that there are no particular size of a deep tightening or anything. If we had received the recession, lenders that could get scared and -- scared even more but most of the negative impact that we have in credit broking is attributable to mortgages, and we expect this situation to continue at least for the period over which we have visibility. E-commerce, here, it is more difficult to read what is happening, but the feeling is that we're also -- we're always completing with Google by the way. So that is also a potential source of uncertainty. But the feeling that we have from -- meaning the [indiscernible] is that people are spending a little bit less. And so they're shopping a little bit less and so on. And possibly consumer credit is similar in a way. So not a great performance in the recession or in a situation in which consumer confidence is not great, et cetera, but not a disaster either.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Okay. Then thank you, everybody.

Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.