Quest Holdings S.A. (QUEST) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Gailey, your Chorus Call operator. Welcome, and thank you for joining the Quest Holdings conference call and live webcast to present and discuss the 3 months 2025 financial results. At this time, I would like to turn the conference over to Quest Holdings management. Gentlemen, you may now proceed.

Welcome, ladies and gentlemen. My name is Alexandros Roustas, I'm the Investor Relations Officer of Quest Holdings. And as usual, I'm sitting here with our CEO, Mr. Apostolos Georgantzis; and our Deputy CEO and CFO, Mr. Markos Bitsakos. Today, we are here to present to you the first quarter of 2025 financial results and answer your questions. Now I will give the microphone to Mr. Markos Bitsakos for his opening remarks.

Good afternoon, everyone. My name is Markos Bitsakos, and I am the CFO and Deputy CEO of Quest Group. As is typically the case due to the seasonality, the first quarter is historically a softer period for Quest Group, contributing approximately 22% of the annual revenues and 20% of the annual earnings before tax. This quarter, we are pleased to announce a new addition to our portfolio, which is Benrubi, a well-established player in the small domestic appliance sector. This acquisition marks another strategic step in our ongoing efforts to diversify and strengthen our business segments. According to our published financial statements on a consolidated basis, the key highlights for the first quarter are as follows: group revenues reached EUR 328 million, representing an increase of approximately 8% year-over-year, primarily driven by Uni Systems and further supported by the Apple network, Info Quest Technology subgroup and the newly acquired Benrubi. EBITDA amounted to EUR 21.2 million, reflecting a solid 13.7% increase compared to first quarter of 2024. Earnings before tax came in at EUR 13.8 million, 18.7% increase year-over-year. Earnings after tax and noncontrolling interest totaled EUR 9.1 million, a 6.8% increase compared to the same period of last year. This is a lower increase versus earning after tax, which grew by 16%, mainly due to the ACS and Benrubi minority rights. Now when looking at performance across our business segments, except for Quest Energy, which experienced a small decline due to adverse weather conditions, all other segments reported growth in both sales and earnings before tax compared to 2024, the respective quarter. As mentioned earlier, Benrubi joined the group as of February 1, contributing significantly to the year-over-year profitability improvement of the commercial segment. Revenue growth was led by unit systems followed by the Apple Distribution Group IQT and Benrubi, while earnings before tax growth was primarily driven by Uni Systems, followed by Benrubi, Apple, Info Quest Technology and ACS. As of the end of the quarter, Quest Group reported a net cash position of approximately EUR 23 million compared to EUR 30 million net debt of first quarter of last year and EUR 82 million net cash at the end of 2024. The decrease in net cash from December '24 to March '25 aligns with our typical seasonal working capital cycle and is fully in line with historical pass. Moreover, in this quarter, the Benrubi acquisition absorbed approximately EUR 28 million additional net cash, hence, no surprises here. So now I will pass to Alexandros, who will give us the sector overview.

Thank you, Markos. Now diving deeper into our segments, we observed that the commercial activity segment consisting of companies Info Quest, iSquare, iStorm, Quest on Line, Clima Quest, GED, FoQus, Team Candi, IQT Cyprus and Benrubi as of the 1st of February 2025, continued to grow by roughly 8% at the sales level while EBT increased by 50% year-over-year, mainly boosted by Benrubi's integration and the decreasing interest rates. IT services sector sales, consisting mainly of Uni Systems, also improved by roughly 16%, while its EBT grew by about 13%. Postal Services, which is ACS sales were flat and EBT grew about 6% sales and sales, of course, were affected by fewer about 3% working days versus last year and very low e-commerce growth during the quarter. And last but not least, Quest Energy segment sales stood by about 9.7% -- minus 9.7% due to adverse weather conditions with flat profitability before taxes. Now let me pass over to Apostolos to provide the outlook.

Good afternoon from me too, I'm Apostolos Georgantzis, Quest Group's CEO. As has already been explained by Markos and Alexandros, most of our segments grew during the first quarter. EBITDA and EBT grew a double-digit growth rate, allowing us to have a strong start for the year and making us more optimistic for the rest of the year. In more detail by sector, the outlook is the following: regarding the commercial activity sector, for the full year 2025, we estimate growth in sales and higher growth to double-digit growth for assisted also by the acquisition of Benrubi and the drop in interest rates. Regarding the IT services sector, these sector is continuing to be positively affected by the strong demand in IT services, while it has a high backlog of signed projects, exceeding today more than EUR 600 million. Double-digit sales growth and improved profitability, therefore, we estimated for the whole of the year. Going to the Postal Services sector. our estimation for 2025 include the growth in sales profitability, mainly driven by e-commerce growth. We also estimate the second half of the year to be stronger than the first half. At the same time, we continue to invest in developing the last-mile local network who currently amounts for about 900 lockers. Finally, for renewable energy production sector, our estimation for the whole year is for a slight decline in sales due to the first quarter and similar or slightly lower EBT versus last year. On a consolidated basis now, our estimation for the whole year 2025, is positive for revenues and profitability. Sales are estimated to grow at a mild pace while high EBITDA is estimated to surpass EUR 100 million. This estimation has also been validated by the course of the first quarter. Quest Group currently cash position is solid with well above $200 million in cash and available credit lines allowing us to continue our planned growth investments as well as to enduring hardships. Now let me pass back to Alexandros.

Okay? Thank you, Apostolos. That was a brief overview for the first quarter of 2025 as well as the outlook for the full year. We are now happy to take your questions.

The first question is from the line of Svyriadi Natalia with Eurobank Equities.

I was wondering if you could give us a bit insight on why the -- we saw such a big increase in the IT segment EBITDA margin. It was also above last year levels and Q1 levels and the full year. And I was wondering if this is something we could see coming also into the full 2025 or if it was related to the [Technical Difficulty]

Ms. Svyriadi, can you hear us? Your line just went mute. We'll move on until...

We heard the question, though. So I can respond. Yes, there is an increase in the EBITDA margin of the IT service sector. But this is due to the more better operations of the company. So there's nothing extraordinary to report here. It's just by doing business better.

We have a follow-up question from Svyriadi Natalia with Eurobank Equities.

Sorry, I lost the line. I don't know if you can hear me now.

We can. Natalia, we can.

Okay. I was wondering on the IT about the increase in the EBITDA margin I was also wondering about the backlog, which has been remaining the same. If this is because projects are being implemented, but new ones are being added and all these stuff. Could you please let me know what's going on there?

Well, Natalia, as I said before, there's nothing extraordinary to report about the improvement of the EBITDA margin of the IT services sector just coming out of a better performance of our operations. Now regarding the backlog, new projects, yes, it's more than EUR 600 million. Projects are coming in, but also projects are ending. So the balance of them is a little more than EUR 600 million. So yes, we see a deal flow for the future. But -- and actually, the projects are 10% more than they were a quarter ago or 6 months ago.

Can you hear me?

Yes, we can hear you.

Okay. Great. I also have a question on e-commerce expectations because you said the commercial department is going to grow like looking into e-commerce, how this will grow. What are the expectations there? Should we be expecting like mid-single digits growth would be looking okay for this year?

Yes. I'd say low to mid-single digit we see that e-commerce growth is not as it was previous years. I'd say that the low to mid-single digit is the most probable to happen.

The next question is from the line of George Athanasakis with Pantelakis Securities.

Congratulations on the results. Question number 1 is, would you expect the deal the sale of ACS to complete this October? That's question number one.

George, this is Apostolos. We don't know yet. This would be decided from my understanding around that period. Therefore, we're not sure yet about it concluding this October, which is the date in which the option can be exercised. If you recall, the deal includes 2 dates for option this October 2025 and another one a year ahead. It's too early to know probably we'll be able to know around that.

Okay. Question number 2 has to do with your CapEx. What is your projection for CapEx this year? And where will the money be invested please?

This is Markos Bitsakos. The total group CapEx for the entire year is expected to be around EUR 55 million. About 50% of this regard to Benrubi so it is already consumed. 35% of this amount is associated with ACS local network and the new hub of ACS in Thessaloniki. The remaining 15% is spread among all other subsidiaries. So having said that, in the first quarter of the year, the CapEx was already EUR 28.6 million versus EUR 3.8 million of last year. And I repeat that the majority of this amount has been consumed from -- by the Benrubi acquisition. So the second largest, let's say, CapEx would be in ACS.

Okay. Great. And can you remind me of your general target for a number of lockers on the strip? And how should we think about that? I mean what does a locker cost.

Yes. This is Apostolos Georgantzis again, George. If you recall, we mentioned already that our plan is to roll out in full scale, at least 3,000 lockers, but it's not going to happen in 1 year. For the end of this year, we estimate to be at around 1,500 and within the next year to surpass 2,000 lockers. The average CapEx per locker is just below EUR 10,000, is around EUR 9,000 depends on the type of the locker and also depends on the size of the locker because we have smaller, larger and more complex or more expensive versus more simple and again, less expensive. The average around just above EUR 9,000, I would say, more or less. Therefore, you could make the multiplication and understand what's the remaining CapEx. Of course, 900, which we mentioned is a number, which is the current number. It's not of the first quarter. We're already rolling up. So it's a number that's going to be increasing continuously over the coming months as well.

That's great. And I read the announcement of the results yesterday and I got the impression that you are suggesting that the margins for the IT services business will grow based on the projects that you're currently executing? Is that true?

Look, it's not very clear. As Alexandros has also answered the question just a while ago from another colleague. We have managed over this quarter, the first quarter of the year, to have a better, let's say, to increase our efficiencies in our operations, therefore, increase EBITDA margin. Of course, as you grow, you gain some economies of scale, but I wouldn't say that the margins would be double, let's say. So we believe that this year, over this year, 2025, we're going to have a better margin versus last year overall because we see that the projects are better, they're running better and let's say, the efficiency at least so far, is at better levels like you've seen over the first quarter. So we believe that this trend more or less is going to also continue during the rest of the year.

That's great. And last one, there were some press reports suggesting that there may be some corporate activity with regards to Uni Systems. The reports were suggesting a listing in the Athens Stock Exchange. Is this something that you're thinking about? Or what are your thoughts on Uni Systems.

Look, just to give feedback on that. We haven't seen that. But yes, it's always in our consideration to examine possibilities for our subsidiary, including Uni Systems. But there's nothing, let's say, concrete behind it at the moment.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Apostolos Georgantzis for any closing comments. Thank you.

Yes. Thank you. Dear all, we would like to thank you for your participation and interest in our company and its prospects and looking forward to talk to you in the next financial results update in the beginning of September. Have a nice afternoon, and thank you.