W.A.G payment solutions plc (EWG) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Eurowag 2023 Full Year Results Announcement, W.A.G payment solutions plc [Operator Instructions]. I would like to remind all participants that this call is being recorded. I will now hand over to Martin Vohánka, Founder and CEO at Eurowag; and Oskar Zahn, CFO, to present the results. Martin, please go ahead.

Good morning, and thank you for joining us for our 2023 full year results today. I'm joined by Oskar Zahn, our CFO, who will take you through our financial review in a minute. But first, a few words from me. Eurowag, in spite of the challenging macro environment we saw last year, delivered a robust set of results in 2023, growing organic revenues at mid-teens and in line with the market expectations. I'm proud of our teams, not only for delivering these results, but also for completing one of our largest acquisitions in history, company Inelo. This integration very much underway. We've a lot of strategic priorities focused on integration and transformation of our business, but they all assist the development and launch of our integrated platform, which is still on track to launch later this year. I'm happy to say that we made significant progress last year and some of the highlights for me include the following. The three OEM partnerships we signed opens a new sales channel for us, which will support our sales coverage and connecting us with new customer pools. The next, we've done a lot with the integration of WebEye and Inelo. I'll talk about this more in detail later. The third, as our customers move to more a digital user experience and ahead of the platform launch, we've invested into our Eurowag application, which will be an expansion of the platform. And as you can see, the users have increased by over half of this year to almost 32,000 users per month. The next point is that I'm very proud of our toll business. We've invested a lot of time and money here, and we're now starting to see the fruits. We've received EETS certification in Czech Republic, Slovakia, Spain and Portugal, and now we've license in 10 countries. This means that our customers can pass through 23 European countries using Eurowag toll solution. We've also had a great success with our new cross-selling acquisitions, which make our EVA sales to increase 6x to 23,000 units last year. And finally, there are 2 technology capabilities, which are important for a new platform. One is e-wallet where customers will have their majority of their business financial needs supported. And the second is our internal SAP system, which will be the core financial system for the platform. And I'm glad to say we've made a good progress on both. SAP went live in January this year. And as it is usual, this implementation of such a large systems, we've a number of following long-term planned releases ahead of us. All in all, we're very happy with our progress, but still certainly a lot of to do. I'll go through our strategic update in more detail later. But now I would like to hand over to Oskar, who will walk you through our financial performance. Thank you.

Thank you, Martin, and good morning to those who are joining us this morning. As Martin has already mentioned, we're very pleased to share with you today a robust set of results despite the macro headwinds we're facing across Europe. Let me take you through some of the key highlights before moving into the details. Our net revenue is by 34.4% to EUR 256.5 million in the year, driven by organic growth of 14.5% and the impact of the recent acquisition of Inelo, which completed mid-March. Adjusted EBITDA as a result of our net revenue growth grew 33.2% to EUR 108.7 million or 12.2% organically and we've maintained margins in line with the last year at 42.4%. Adjusted earnings per share improved by 12.8% to 6.49p. Looking at our investment into the business, we spent EUR 50.9 million of CapEx, of which EUR 21.7 million was on our transformational program, taking the cumulative spend of the program to EUR 47.2 million, with the remaining EUR 3 million to roll into FY'24 to complete the program. As expected, following the Inelo acquisition, our net debt increased to EUR 316.8 million at the year-end, taking our leverage to 2.9x net debt to EBITDA. Our priority remains to bring this back in line with our medium-term guidance of 1.5x to 2.5x. Our net revenue growth was supported by strong organic mobility net revenues of 28.3% and high single-digit growth from payments. Payment solutions grew 9% to EUR 147 million, supported by the growth in toll revenue and 8.4% growth in active customers. The slowdown in revenue growth is driven by the economic headwinds in Europe, which is impacting freight demand. And as a result, we see our customers driving less kilometers. With this backdrop, we still managed to deliver a robust growth, reflecting our resilient business model and once again confirming that our products are truly mission-critical to our customers. With the contribution from our recent acquisitions, we saw mobility net revenues almost doubled to EUR 109.5 million. Mobility solutions now represent 43% of total net revenue and we expect this to grow to approximately 45% with the full annualization of Inelo. This is an important change to our revenue mix, especially as most of our mobility business is subscription-based. And as previously reported, it is our ambition to move the majority of the Eurowag business onto this model. Adjusted EBITDA grew 33.2% to EUR 108.7 million with margins of 42.4%, I'll talk about EBITDA shortly. If we move below the EBITDA line on the income statement, our adjusted profit before tax grew 3.4% to EUR 56.7 million. The underlying growth was impacted by the higher debt and therefore, higher interest costs. To show underlying performance, we report on an adjusted basis, there are two items worth mentioning: amortization of intangible assets and goodwill impairment, both are noncash adjustments, but let me move to the next slide to give you further color. As a result of the Inelo acquisition, our acquired intangibles increased by EUR 301 million in the year. As we amortized these intangibles over a short period, the amortization charge grew from EUR 22.2 million in FY'22 to EUR 43.4 million in FY'23. We're also required on an annual basis to test our goodwill for impairment. I have a slide with more details on this later, but I wanted to show that even after our impairment of EUR 56.7 million, we still have EUR 266 million of goodwill on our balance sheet at the end of the year. The other noticeable change this year, which I've already mentioned, is a higher debt position following the acquisition of Inelo, which has impacted on our interest costs, which in themselves have increased by EUR 14 million. The last point to note on the balance sheet is that we've written down the fair value of our JITpay investment from EUR 14.4 million to 0. This was a reflection of the performance in the second half of 2023. Following the announcement last month, we continue to work with JITpay and their other shareholders to work through their operational performance issues. This is the first time we're showing you this slide with the different products and the absolute contribution to growth in the year. And as you can see, we've significant growth contributions from the majority of our products this year. You can see Inelo's contribution this year on the right side of the chart. And if we had acquired it at the start of the year, it would have contributed over EUR 47 million. As I already mentioned, EBITDA, including our acquisitions, increased by 33.2% to EUR 108.7 million. Taking out our acquisitions and looking at the legacy business, EBITDA grew 12.2% to EUR 91.5 million. You can see from the chart, we report other operating income of EUR 8 million, which is the realized FX gains as a result of our prudent risk management. We called this out at the half year, where the majority of this was recognized, but as a reminder, our objective is to reduce the currency exposure for purchases of fuel, employee expenses and other operating expenses. Our intention is to manage the cost, not to pursue financial gains. There were a few factors that impacted growth in our margins. The first being our investment in people, where we see organic employee expenses and technology expenses increasing by 22% and 36%, respectively. Almost 1/4 of the increase in employee expenses was due to the salary increases, bonuses and senior hires to ensure we attract and retain the right talent to support the business through the next phase of our transformation. Growth in technology expenses reflect the group's focus on technology transformation, cloud transition and the implementation of our new ERP system. It should come as no surprise that the current economic backdrop that our customers have come under pressure, not only with less kilometers driven, but high interest and inflation rates, which in our industry can lead to bankruptcy very quickly given the small margins they operate on. You can see our credit losses have increased in the year because of this. Please note that we measure these losses against gross revenues, and the ratio has increased from 0.1% to 0.3%. The group continues to apply rigorous credit loss controls to manage this risk. And as a result, approximately 74% of its receivables portfolio balance was current at the end of the year, similar to the previous years. Our overall EBITDA margin of 42.4% was in addition to the higher credit losses negatively impacted by WebEye where integration is ongoing and costs are not proportional to our legacy Eurowag business and positively impacted as expected by Inelo. Before I move to our cash flow side, I wanted to briefly walk through the goodwill impairment accounting treatment. A very boring accounting slide, but I wanted to be clear on the reason for the impairment. You're well aware of the rationale for the acquisition of Inelo, its fleet management solution and work time management solution is an important addition to our new platform and its 600 workforce brings new and complementary talent to Eurowag, mainly in tech and product. As you have seen from the earlier slides, Inelo has made a meaningful contribution to our results this year, and we're delighted with the acquisition. Each year, we're required to do an impairment test on our goodwill. This year, our initial goodwill was EUR 322.7 million, of which EUR 171.8 million was for Inelo. On assessing the cash flow projections over the next 5 years, for the FMS CGU, we took into account three factors: Current market conditions, particularly Poland, where the majority of Inelo revenues are delivered; stage of integration into the group; expected revenues from cross-sell. Taking into account these three factors we made two adjustments: One, the revenue growth assumptions taking into account the macro conditions; and two, we adjusted our cost synergy assumptions to reflect the high investment in systems and related costs. This year's test resulted in a carrying value of the FMS CGU being EUR 52.2 million less than the fair value and hence the impairment charge. There was also an impairment charge of EUR 4.5 million related to the tax refund and toll CGUs. These are noncash adjustments and are recorded on the income statement as adjusting items, reducing profit before tax and hence impacting our EPS. As a slide suggests, 2023 has been a record investment year at Eurowag, both organically and inorganically and can be seen in our finance and investing activities. Our borrowings and investment in M&A mainly relates to the acquisition of Inelo. You can also see our organic investment in CapEx, which I'll outline on the next slide. On the left-hand side, we had around EUR 102 million of cash from operating activities before taking into account working capital, interest and tax. Profit before tax on the slide excludes the noncash goodwill impairment mentioned earlier as well as other noncash adjusting items such as depreciation and amortization, interest expense and impairment loss on financial assets. As previously reported, our working capital can swing in any direction on a daily basis and based on our gross revenues, which was EUR 2.1 billion this year. We've a slide in the appendix, which shows working capital over a 12-month period and is a better reflection of our working capital management. Looking at working capital as of the 31st of December, we had a negative swing of EUR 44.4 million, mainly related to timing of certain payments at the end of 2022 and changes to payment terms in Spain, where we saw competitive pricing from smaller fuel suppliers with shorter payment terms. And finally, as I mentioned before, interest costs have increased due to a higher debt, but also over EUR 3 million of this cost increased relates to our EURIBOR exposure from factoring of receivables. Moving to CapEx on the next slide. We spent EUR 50.9 million in CapEx this year. The increase, as you can see, is firstly from the acquisition of Inelo of EUR 8.6 million; and secondly, from our organic ordinary CapEx, which increased slightly due to the higher CapEx to net revenue ratio at WebEye due to the higher investment in on-board units. As we outlined at the half year, Inelo and WebEye both have a high requirement for hardware and our CapEx mix has changed with 29% of our ordinary CapEx spend on on-board units. And therefore, our CapEx to net revenue ratio has increased to 11% for the full year. We can see in the light blue purple box, our transformational CapEx program is largely complete with EUR 47.2 million spent over the last 2 years. We anticipate the final EUR 3 million, which takes us to the total spend of EUR 50 million, as previously guided, to roll into FY'24. Going forward, we'll expect our ordinary CapEx to be around 10% of net revenues. I won't go through all the tech investments we've made, but on the right of the slide, we've categorized them by each layer of our platform. You can see we've invested in the front end, so the user experience and Martin will take more -- talk more about this later and show you examples of what the Eurowag app looks like today. We've also invested in building some of our own products with EETS being a great example. And finally, there has been a lot of investment in the data platform, which is important not only for the new platform, but to us as a business. As mentioned at the Capital Markets Day, we'll start to report different KPIs aligned to the new platform. This data platform provides these reporting capabilities. Today, we confirm that our medium-term guidance remains unchanged. We anticipate that in the near term, net revenue percentage growth to be around mid-teens. However, we believe the value creation from our platform and full extraction of the acquisition synergies over the medium term, net revenue will return to high teens growth. As I've already mentioned, full year adjusted EBITDA margins are expected to be in line with FY'23 at around 43%. And over the medium term, we still anticipate margins to trend to high 40% as operational leverage and acquisition synergies are realized. We expect to keep our capital expenditure at around 10% of net revenues with a focus to reduce duplications across IT, hardware and technology processes over time. As a result of the deferred consideration payments expected this year of around EUR 35 million, which is less than guided at the Capital Markets Day, mainly due to JITpay and the additional incremental facility we've utilized last year, we anticipate our net debt leverage to be moderately above our 1.5 to 2.5x range at the end of FY '24, and will fall within the range in FY '25. I will now hand you back to Martin.

I wanted to remind you about the industry in which we operate, and why it makes sense for Eurowag to be at the center of the commercial road transport and how we can help make this industry clean, fair and efficient. As a reminder, this industry is incredibly fragmented in more ways than one. Around 90% of carriers are small SMEs with an average of 7 trucks in their fleet. Every journey requires 30-plus administrative tasks. And because we're not fully integrated digital platforms yet on a market, only 13% of companies are being digitalized, not surprisingly, mainly the large companies. This regulation increasing, small SMEs are struggling to keep the pace with reporting and general administration. And finally, lack of digitization and connectivity in the industry means that 30% of trucks on the roads are empty with heavy environmental impact. With Eurowag being at the heart of the industry means we create the first digital platform, which enables customers to be more efficient, grow revenues, improve their cash flow and decarbonize. Eurowag started on this digital journey only a few years ago, where we started to accumulate specific data-driven capabilities from which we could start to construct this platform. It is either by building and developing our own products or where we saw a quicker route to market and cheaper, we acquired. You can see all brands we acquired since 2017 on the left. Last year, we completed the largest acquisition, Inelo, which will bring fleet management solution and work time management solution into a new platform, which is important to addressing new labor and safety regulation in Europe. With every acquisition, there was some form of integration, but what was important was that we started to invest in the tech and data foundations in which these products would sit with unified branding, user experience, streamlined workflows and a much simpler bundled pricing. Such integration also supports development of different sales channels as customers are more and more ready for omnichannel experience. Oskar has already covered this. Our large CapEx transformational program was necessary, as I've just outlined, to ensure we brought all these different pieces together. And once the platform is launched at the end of the year, we can bring -- we can begin to truly see the value creation of our efforts over the last few years through accelerated cross-sell and number of trucks connected to the platform. As you can see from this chart, we've already been able to capitalize on our acquisitions with high single-digit growth in both customers and trucks last year. But looking back further, we've increased our customer base by almost 40% over the last 3 years. We've been able to cross-sell mobility products and services into our fuel cards and toll customer base and vice versa. You can see the results on the right chart. We've experiences with cross-selling. But so far, it has been done all only by our direct sales team, which makes up over 600 colleagues across 19 markets. The launch of the platform will only accelerate our ability to cross sell faster and allow us to expand into new territories through digital needs. As I've mentioned at the beginning of this presentation, one of the areas of focus is integration of WebEye and Inelo. Following these acquisitions, our organization has almost doubled in the size. And this, of course, comes with unique opportunities as well as challenges. However, I'm pleased at the progress we made last year and continue into 2024 with great momentum. We've gained some new skill sets from both acquisitions, particularly in technology and digital product. We've taken some senior leaders in Inelo and integrate them on to a group level. An example is that we've split the Chief Product Officer role into two, given the importance and have appointed an Inelo Senior Leader as Chief Product Officer that focused on operations together with Martin Strigac, which you know, who will be more focused on strategy. We're now fully ready and committed to deliver our new platform at the end of the year. The sales teams are now also fully integrated into one agile sales team with the same objectives, same remuneration to maximize our cross-sell opportunities and acquiring new customers. I won't stay on this slide for long, as most of you will be familiar with it, but just a reminder of the different layers of our platform and who are the main users. As you can see on the top, we've owners, dispatchers and truck drivers, all needing a different digital user experience and utilizing different products, either before a journey on the road or after a journey. These are the key users of the platform. I've talked about the different sales channels with direct sales being a majority of our sales today, but we've made progress on our digital and indirect. And therefore, our focus for this year is about bringing these together into an omnichannel approach. We continue to work closely with our OEM partners to pave a new way of selling our products and the new platform when available. I do not need to talk about our products and services, but the final layer, which is the most important is the technology and data layer. Oskar has already mentioned our investment here, but this is where I wanted to highlight the unique set of data Eurowag now captures. The data we collect covers every single touch point of our customer journey from real time visibility of fleets to post journey administration tasks, including information relating to our customers' customer. All of this data will not only enable us to improve our products and services, but will address the clean inefficiencies in the CRT industry. We're building an industry-first data platform, which will not only transform our business, but also our customers, which leads me nicely into this slide. What you see on the screen are live features of our Eurowag mobile app today. We've been developing our app for last 2 years, and this will evolve to reflect the platform once it's alive. You can see customers can already use payments, fleet management solutions and our work time capability, which will be upgraded when we can integrate Inelo into the application. The development in the app last year means the numbers of users increased by almost 60%, and we've now around 32,000 monthly average users. This is great evidence of hunger our customers have for digital solutions, simplifying their operations and improving efficiency. As we add more capabilities, we're confident the number of users will increase. And of course, the launch of the new platform shall accelerate the take-up of users, too. I'm glad to show we've made progress since we shared this slide at the Capital Markets Day last October. Q4 last year was a busy quarter for our product and tech teams. I've tried to demonstrate that the milestones in line with the layers of the platform. At the front end, we've mapped the first customer journeys, designed the digital touch points or onboarding, and we prepared a new business and pricing model. As we look out into this year, it's taking the designs and moving it into development, integrating and continuously testing. And from Q2 and Q3, we'll start to migrate some of our existing customers onto the platform. So we can really test, adapt and be ready for our soft launch in Q4. As I've already mentioned, collaboration with our truck manufacturers, OEM partners is ongoing. With regards to all our products, we need to create product modules before we can integrate them into the front end. And this has already started. The launch of our new ERP system, I've already mentioned. This is a critical piece of our platform as it forms our core financial system and allowed us to scale this modern technology. Our data platform will be continued to evolve and we'll need to migrate customers data into one place, including WebEye and Inelo data. So as you can see, we've made great progress. We've still lots of to do, but I'm very confident with our launch of platform in Q4 this year. I'd like to show this slide as it continues to endorse why we're so determined to succeed at delivering this platform. By creating our end-to-end digital platform, we're improving processes that are unnecessarily complicated. Drivers should be able to wake up and start a journey without having to worry where the next load will come from, where or when they will stop along the way to fuel or rest. Our aim is to make the end-to-end journey as easy and painless as possible. Our Payment solutions to simplify the payment process allow cost savings and improve working capital. Our Mobility solutions will improve efficiency in the back office as well as on the road. As these come together in a single platform, we'll be able to add further value. Lastly, let's not forget that 9% of EU carbon emissions are generated by CRT sector and Eurowag is well placed to help reduce this through improving truck utilization and other products, which nicely leads me to my final slide. We're committed to improving our environment. We're committed to make the industry attractive again and support the communities, in which we operate. We're in control of all these, this added benefit of helping our customers reduce their emissions. We've tools to help them. This could be to improve drivers' behavior, better routing or utilization of their trucks. And over the time, we can support our customers' transition to clean alternative fuels as soon as are available. So to sum up, we had a resilient 2023, achieving robust double-digit organic growth, and we've made a very good progress on the platform and the integration of newly acquired businesses. Looking into 2024, there is still a lot to be done, and we've to manage it against difficult macro backdrop. However, we've been through these cycles before. And I've a good -- and we've a good track record of consistent growth through that. Therefore, we remain focused on extracting the synergies through our cross-sell opportunities, we're confident in soft launch of our platform in Q4 this year and as Oskar mentioned, we're focused on deleveraging. With further growth opportunities through cross-sell and geographic expansion and the value we're unlocking for customers through our digital platform, we're confident that we can continue delivering sustainable growth for all stakeholders. And with that, I'll open the Q&A session. Thank you.

[Operator Instructions] And your first question comes from the line of Gautam Pillai from Peel Hunt.

Martin, can you add a bit more color to the OEM partnerships. The 3 deals you've signed, are all of them similar in terms of products they've taken up or scale? And is there a scope to expand these partnerships over time? Also, when do you anticipate the revenue growth to accelerate via the OEM sales channel? Is that after the platform launch? That's my first question on OEMs. Secondly, you also mentioned that the mobile app now has 32,000 monthly active users, which is quite impressive. Do you see evidence of more cross-sell amongst these customers who use the mobile app? And finally, what percentage of your customers do you expect to be on the platform launch in Q4? I assume it might be a very small number? But have you already had conversations with some of the anchor customers who you expect to migrate to the platform in Q4? What has been the feedback so far?

Thank you, Gautam. Thank you for great questions. Regarding the OEMs, yes, they've similar nature in a sense that we're -- the basis of cooperation is supply of our mobile application into their infotainment. This is the information which you're receiving earlier. However, this cooperation allows us to further upgrade for the function of this, which will be available for the platform. So in fact, the application sitting in as native application in infotainment, they'll be growing together this growth of capabilities on the platform. Both the trick is for further expansion of the revenues, which we already record now because already we're booking some revenues because we're receiving compensation for the development and for placing of these applications into trucks, but what will be the trigger for further acceleration is when we converge these new happy truck owners for the subscribed customers to our platform. And this is something, Gautam where I cannot guide you for now because as we said, this is, on one hand, very exciting, but pioneering venture by definition. So we do not know yet how -- what will be the conversion rates when customers will be standing in the dealership site and taking new truck back home. So this is something where we're exploring these truck manufacturers. What, however could be expected that different truck manufacturers will have different pace of adopting and learning together with us, how to effectively upsell or cross-sell customers in this instance. So we might be expecting uneven. It depends on engagement, on specific approach. You might know that every truck manufacturer has a slightly different distribution model. Somebody has independent dealers, somebody owns the dealership, et cetera. So that's why we're cautious with making big statements. However, the potential is immense. Just for a reminder, these three truck manufacturers covers 45% of newly introduced trucks on European market. And again, these are the difference, whether they're e-trucks, LNG trucks or they're classic internal combustion engine trucks. When it will be happening, it will be happening quarterly from this year when the certain models, new models will be hitting the roads. And as was published earlier we can speak only about one, which is Iveco, which is openly talking about and this excitement about our cooperation and other two we were not yet allowed. When it comes to second question, mobile application and cross-sell opportunities. Thank you, Gautam for noticing it. And as I was mentioning in the previous video, this is another strong proof point of real hunger of customers for simplifications. Because sometimes, we're getting questions, Martin, will not be whole this new environment too complex? No, it is exactly opposite. If you condense, if you collapse all these number of tools into one, you simplified their life. You bring the data in one place. So customer does not need to use paper or excel spreadsheets or even on a way in a truck, you can imagine that this is really a nightmare. So this is just great evidence that we're going absolutely right direction. When it comes to cross-selling opportunities, yes, when it comes to the smallest truck operators, meaning those who are driving and owning the truck. They do not have need for a web-based application or they rather prefer to do all the transactions, if possible, through mobile application. Yes. So this segment, definitely, here, we see that our mobile application will accelerate cross-sell as well in these companies where the owners are running the truck and eventually having maybe one or two run by his brother or sister or whatever. So that's correct observation. Again, to be seen with the launch of a platform where the old products will be available, and we'll see what will be the adoption rate. But again, for a reminder, key theme of the platform and bringing everything together from Eurowag perspective is accelerate cross-sell. So this is the highlight. This is the life of the platform sales. From a customer perspective, as I said, it's a simplification of their operations and efficiency improvements gained through availability of the data being in one place and streamlined workflows. And the last question, how many customers will be at the soft launch. Yes, yes, yes. Gautam, we do not speak about single customers, definitely not. This would not be representative sample. We speak about a quite sizable number of customers, which were either using single products. And I'll put it differently. We were looking at the customers, which -- the groups, which -- where we see the biggest potential for cross-sell and which are along with Eurowag, which are loyal to Eurowag in order to get a early on feedback and make sure that through the transition of the first batches of the customers, we'll be facing the least possible attrition. So I'll not -- I cannot give you the exact number, but this will be sizable portfolio, enough to make sure that for the soft launch, we're confident with the quality, we're confident with the perception in order to avoid any negative surprises at the soft launch.

Your next question comes from the line of Rory McKenzie from UBS.

It's Rory here. Three questions, please. Firstly, on the market headwinds you described, it looks like average revenue per payment solutions, truck was down maybe 2% year-over-year in H2. Can you say how much was the headwind from the lower miles driven by your customers? And then so far in 2024, what trends are you seeing? And would you expect Payment Solutions organic growth to improve from the Q4 level at all? And then secondly, on the other operating income this year of EUR 8 million, should we treat that as nonrecurring? I guess without that, an adjusted EBITDA margins would have been more like 40%. So what are the other main moving parts this year to get you back to 43%? And then finally, on business development, can you talk more about how the digital platform launch and the other investments you've made could change your customer reach and where it might open up more potential for share gains, which market is this going to enable you to get into faster?

Thank you, Rory. I'll ask Oskar for the first two questions, and I will cover the business related or business development related one.

Rory, on the market headwinds, clearly, it's different by region in which we operate. And as you know, we cover most of Europe. And the headwinds that we typically have seen, the usual things, inflation, interest rates, et cetera, but it's the demand that has driven the lower demand for freight and as a result, less kilometers driven. And that ranges, in some countries, it was down 12% and others, it was down a lot less. What we expect is the markets have not improved significantly, but we expect to offset that by what we continually do and what we've continually done in the last 3 years in terms of continue to get more active customers, more active trucks. And hence, as we progress with this platform and Martin mentioned it earlier, that it will accelerate the cross-sellability of our business, and that is key to offsetting some of the reduced kilometers driven. So it is various and it is not uniform across the business. In terms of the payment organic growth, you're right, in terms of -- it was down a little bit. We talked about 9% growth rate. And that's a direct consequence of what we've just talked about. We do expect to maintain that growth and possibly accelerate it. We had a few issues last year, if you recall, at the beginning in H1, we had some challenges in Portugal. And as a result, we continue to expect to grow. And in line with the medium-term guidance and short-term guidance that we've put in this release, we expect to still deliver mid-teens growth. So that hopefully in terms of the balance of our portfolio, we're continuing to cross-sell not only -- we've got our new portfolio from Inelo customers. And clearly, that will fall -- some of the cross-sell opportunities fall into payments, and vice versa, where some of our payment solution customers will get some mobility. But we're very much focused on the integrated platform, and that is a completely different offering to our customers. It's very unique. It's about bundling of products and services. And hence, as we progress through the next 18 to 24 months, our revenue mix will be starting to change. As Martin alluded to, it becomes very difficult to actually forecast precisely, which bit is Mobility and which bit is Payments because we're selling bundles and almost an access to a platform. If I may, Martin, before you get into the platform discussion, maybe I'll touch on Rory's question on operating income, the EUR 8 million, which is a very good question. So yes, you're right that the margins would have been a lot less. But if you actually look -- most of that EUR 8 million was in quarter -- in H1, it was EUR 6 million and EUR 2 million split in the years. And if you strip it out, you actually see the margins improving almost 400 basis points into H2. So the underlying business is already recovering that, Rory and that's what flows into 2024 for us. So if you strip them out from each half, you'll see there is a significant organic improvement already in H2. Martin, I'll let you answer the platform question.

Yes. When it comes to business development opportunities, we made a very conscious decision to not further expand beyond Germany, which was the last market, which we've opened because we were expecting the platform, which is not only designed to -- there's a key theme for the cross-sell, but it's supporting digital and indirect channel, which is, in essence, very similar to a digital channel, only to specific means of new trucks. And therefore, we said to ourselves it's better to wait for the platform because this allow us to penetrate new markets, new geographies. It's much less efforts, much less cost compared to traditional market opening, where we at first had to invest heavily into direct sales force, where you've immediately a high cost base, and then you're catching up with the revenues. That was the model, which we used so far. So digital and indirect channel is opening new horizons in this sense. And therefore, yes, you're right. You can expect that the platform is not only tackling a number of products sold per customer, but it will accelerate as well the -- our ability to acquire customers in new geographies, but as well to do it cheaper and more effectively in existing domains because we should not forget that still there is a huge avenue for growth with existing markets where Eurowag is already operating.

[Operator Instructions] And your next question comes from the line of Marco Maglioli from Jefferies.

Just two questions for me. One regarding the active customers and active trucks in Q4, did you see any stabilization of these KPIs? And could you also help us understand the dynamics for 2024? What growth do you target for both? And then the second one on JITpay, on the cancellation of options. Could you explain us who will be your financial -- your supply financing partner? Or do you plan to do it in-house or again, with some partners?

Oskar, if you can cover the first question. I will cover the JITpay.

Yes, Marco, both good questions. So on the active customers, and we -- that is clearly the fundamental part of our -- the foundation of our business. We continually need to grow that because that is the basis of our revenue. In terms of stabilization, we -- yes, as you've seen also from the revenue split, it's typically H2 weighted. We've seen an improvement in H2 and certainly in getting our volumes up, in getting our customers up. So that is an important aspect for us. And as we go into '24 with -- as the note -- the RNS actually says that the note of caution, but also optimism that we'll be able to continue to doing that. And how do we do that? It's that continuous assessment of customer by customer. As you know, we've a dynamic pricing mechanism, customer unique. And because we've the data, we're starting to use some of that data to assess what pricing we can have by customer, what bundles as we move into the product, then we'll accelerate. So we're trying to get as Martin was earlier alluding to, the three services by customer, moving that up as we said at the Capital Markets Day, hopefully, to six in the near term. That's crucial, but it needs the active customers and active trucks to be the foundation, and that's what we focus heavily on. Martin, do you want to answer the JITpay?

Yes. So regarding the JITpay, just for a reminder, JITpay is 13th acquisition in the last few years. And it was the first one when we had to do operations like a write-off of the value. The other were very successful and largely delivering what was expected. So just to put it into context. Secondly, JITpay was early-stage organization. So it was not comparable to well-established businesses, which we're acquiring before. And the reason for acquiring that because factoring and invoice discounting is really very important functionality and feature of our platform, which we do expect because still we see the gap in financing of our customers. And we decided for the M&A because at that time, we didn't have sufficient know-how first. Secondly, there are no other more mature companies in the market because this is really very fresh type subset of the, let's say, financing already factoring industry, where you've seen in the past, only general factoring companies, which were not able to propose and to create solutions, which will be tailor-made for trucking businesses. So in this space, was very few business. That's why we decided to acquire them. We invested only -- and acquired only 10% of the business. And as you was informed through our RNS, the JITpay didn't met certain financial targets, which we deemed as important and which were agreed. And as we've seen lately, their problems were mounting, which has resulted in the fact that JITpay will be restructuring their group. Having said that, we do continue to be very much keen on this feature to be implemented into our platform. So there are multiple ways how to deliver that. It will not be the way, which we expected when we acquired the JITpay, but we still continue in dialogue with stakeholders -- various stakeholders around JITpay, whether in new situation, we still see the way how to build what we want. Of course, the second alternative is to look on other businesses, which were created in the meantime and to pursue similar way like this JITpay or the third, which is as well legitimate and which we're looking at actively is that now while being much more mature in terms of our own technology capabilities, in terms of understanding of the business, in terms of advancement and as well our own e-money license, whether the best way forward will be in-house development. So I cannot comment, which will be selected, but we're looking at all those now and remain committed to connect this feature or implement this feature on platform in the best reasonable cost and the most variable time horizon.

There are no further questions on the conference line. I'll now hand over to management to address written questions submitted via the webcast page.

Great. We've got two questions online. The first one is around the reasons behind the write-downs for the investment in Inelo and JITpay, given the initial investments were less than 12 months ago. Is there any read across to the cooperations? And the second one is, how do you see credit losses developing in 2024?

I'll take first. So yes, let's start with Inelo. And as I've put in the very boring accounting slide on the impairment. Basic accounting, you acquire a business, you've got to do a fair value of the assets acquired and you compare that to the consideration you paid, the difference is goodwill. Inside that set of assets that your fair value are also intangible assets such as the IT systems, their book of customers, et cetera, those are intangible assets. With the acquisition of Inelo, we had large quantities of both. We had almost over EUR 300 million of intangibles put onto the balance sheet. And we had initially as we put in the slide, almost EUR 172 million of goodwill on initial consideration. So two things happen as a result of that typical accounting in terms of the intangibles, we amortize that asset over a fairly short period of time, and that's a charge to the income statement over the useful life of that intangible. In terms of the goodwill impairment, what we're required to do is every year, assess the value of that goodwill on the balance sheet by doing an impairment test. And we typically do that by looking at the cash flows over the next 5 years and the terminal value, the growth rates, et cetera, when you do a typical DCF model. And what we've done this year is we've assessed the -- based on where we're today rather than where we were 18 months ago when we started looking into Inelo, what are the cash flows that we expect to have. And as the majority of these revenues and cash flows are from Poland, where we've seen right back to the earlier question, in terms of the headroom that Rory raised earlier, the area that we've seen a lot of stress in terms of less kilometers driven is Poland. And so we've lowered the revenue expectations for Poland. We've also took longer to integrate the business than we had typically expected. So that only happened in the back end of 2023. And as a result, some of the synergies were not delivered as we originally assumed. We also had to take into consideration their IT systems, which were not to the standard that we would expect at Eurowag, for example, protecting us against a cyberattack, et cetera. So we had to upgrade to some of the -- upgrade some of those systems, which created an additional cost rather than a revenue synergy. So when you took all -- when we took all of that into consideration, what that meant was the value of the discounted cash flows going forward versus the book value of the goodwill was the difference, and we wrote off the difference. It's a noncash adjustment, and we've taken that hit. You can say it's early. Yes, we now own it exactly a year, halfway through March. We've got the privilege of having a lot of more benefits from that acquisition that are perhaps just financial. We've got some -- our CPO is now from Inelo. We've many management roles that have moved over from Inelo into group roles, and we're certainly gaining from the benefits of the business being almost entirely a subscription-based model, and we're using that very much in terms of building our platform capabilities. So that's what we've had to do. We did it for what we've to do it for all our goodwill, not just Inelo. So that's what we -- the action we took in 2023 for Inelo. In terms of JITpay, I think, Martin has just explained it. We had an investment of EUR 14 million. We deemed it to be of no value at this stage. We did also -- didn't -- we had an option that we have -- we did not trigger because we felt that was not appropriate either. And therefore, we wrote that down to Nil. On to the last question of credit losses, yes, it went up, and it is a sign of our customers having to deal with the macro headwinds we talked earlier, the inflation, the interest rates, the less kilometers, lower demand, all of that has had an impact on our customers. And with them operating at very low margins, we mentioned this at the Capital Markets Day, 3% to 5% margins are typical for our customers. Sometimes small items can trigger bankruptcies. And that's something we're very, very mindful. We continue to have our own credit rating system that is very, very rigorous, and we try to manage this very carefully and hence some of the comments we've put into the RNS such as the receivable balance at the end of the year. It's against gross receivables as a reminder, and that's gone up from 0.1% of gross revenues to 0.3%. Looking into 2024, there -- of course, there's always the chance of further credit losses as the macro conditions continue. We don't know when that's going to turn around. As you've seen from all the announcements recently from the national banks, there's talk of interest rates coming down, inflation is falling in most of the territories we operate in, although -- albeit we know we're still fairly high. So there are signs of positivity as well in the marketplaces. But yes, the fact is we use the data that we've from our platform to assess each customer. And often, it's us who save them by being able to prolong their credit facilities, being able to work with them as they navigate through a tough economic environment. And bizarrely by giving them longer credits, we can actually save the customer from overall bankruptcies. And of course, throughout the process, we benefit from the revenues that we charge as a result.

Great. I'm just conscious of time. I'll get back to those who've put some questions online after this call. But Martin, if I can maybe hand back to you just to close off.

Yes. So thank you for your questions. What I would say that the key messages which you shall take away. If you look back since IPO, and I know that we're all frustrated, who knows Eurowag for 3 decades and more recently, last few years from the share price. But if you look -- this is one message. But if you look on our promises, what we said to the market at IPO in terms of financials, in terms of changing the business from fuel card, sales focus into tech-enabled, data-centric business, everything we're delivering. Year-by-year, we're delivering. And we, again, confirm our guidance when it comes to near term, which is mid-teens and in the midterm to high teens. So this is the first key message to be taken. We went through a heavy investment period, again, very much planned. We were very clear at IPO, what we're doing that we're regearing the business, which required huge investments into in-house development, into M&A, into upskilling the teams, that's what we did. And this period is now coming to the end. So we had a last record year and now we're only facing the deferred payments to -- for these few acquisitions, which we did in the past. So everything is executed as planned. And when it comes to the platform, which is the kind of peak or where we start to harvest all these bits and pieces, all the pieces of the jigsaw, we're well on track. There's a soft launch in Q4. As I was assuring you, we'll have quite a notable number of customers already operating before the launch. And we see more and more evidence of customers waiting and hunger for the platform. So we're very confident that the platform will have effects as we're expecting, although we would be only able to quantify how much it will affect our numbers and eventually further influence our guidance only in 2025. So we're stepping into 2024 with confidence. While -- as Oskar said, there is as well macro, which is showing signs of -- amount of optimism, but as well signs where we need still to be cautious. Overall, I think 2023 year was a positive year with a lot of great foundations built, and we're looking ahead to 2024. Thank you for your support and being with us. Thank you.