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

Good day, ladies and gentlemen, and welcome to W.A.G Payment Solutions Plc 2024 Half Year Results. The presentation will commence shortly. [Operator Instructions] I would now like to hand over to Martin Vohánka, CEO, to open the presentation.

Good morning, everyone, and thank you for joining us today for our first half year results for 2024. I'm joined by our CFO, Oskar Zahn, who will take you through our financial results in a minute, but a few words from me before I hand over. One thing I'm proud of since I started the business almost 30 years ago is that we have consistently delivered strong growth, no matter the macro and market headwinds. In the first half of 2024, we've delivered strong double-digit net revenue growth of over 18% as a result of both organic business and the Inelo contribution. As well as delivering these results, the business has been focused on integration and transformation of our people, technology and data systems, all of which are supporting the development of integrated digital platform, Eurowag office. I'm pleased to say that we have made significant progress in the first half of the year, and the highlights for me include following. First, as part of our move towards an omnichannel user experience for customers, we tested a digital customer journey in Poland offering bundles, which is uncommon in our industry and which is helpful to test the market ahead of our platform launch. Secondly, we are evolving Eurowag mobile application for owners and dispatches as one of the outlets of soon to be launched, Eurowag office platform, and we saw an increase of 12% in the active users to 36,000 compared to the end of 2023. Next, as you have seen this morning, our total revenues have grown significantly in the first half of this year, partly due to gradual introduction of CO2 charges in some European countries, but also thanks to our ability to capture these opportunities to investment into our own each solution. This comprises a large back-end systems for [indiscernible] calculations and also our onboard unit EVA. We successfully progressed with further certification across Europe with Slovakia being our 11th license country. We also continue to invest in alternative fuel solutions for our customers in an effort to support the transition to a low carbon future. With the continued expansion of our synthetic Fuse network, we have created the first HVO corridor in Central and Eastern Europe, connecting Austria, Slovakia and Czech Republic. And we have just probably announced that we have become the first CRT focused e-mobility service provider in Europe. And the final one for me is that I'm very pleased with the preparations of integrated platform Eurowag office. The tech and product teams have been working hard to make sure we are ready for a phased rollout of the platform in Q4 this year. We have already delivered the migration of a portion of existing users onto our new platform, starting with [indiscernible] where we have around 200,000 monthly active users migrated onto the Eurowag office navigation application for drivers. And we are currently working on migrating the first batch of fleet management and fuel card customers, which already circa 7,000 fleet management customers migrated. I will come back to these milestones later. I will go through our strategic update in more detail, but now I would like to hand over to Oskar, who will walk you through our financial performance.

Thank you, Martin, and good morning to everyone on the call. As Martin has already mentioned, we are pleased to share a strong set of results with you for the first 6 months of the year despite the continued macro headwinds we still see across Europe today. Before I move into the details of the financials, let me take you through some of the key highlights. Our net revenues increased by 18.4% to EUR 141 million driven by both organic growth and in as additional 2.5 months contribution compared to H1 last year. As a result of our net revenue growth, adjusted EBITDA increased by 18.2% with the margin in line with the last year's first half results at 42.1%. Adjusted basic EPS decreased to EUR 0.0251 per share as a result of higher depreciation and amortization, together with increased finance expenses. Looking at our investment in the business, we spent EUR 20.5 million in CapEx. This includes around EUR 3 million carried over from our transformational CapEx program, which is now complete. Our net debt position has improved from year-end, with our net leverage now at 2.6x net debt to adjusted EBITDA, which is just above our target range of 1.5x to 2.5x. Our net revenue growth was supported by strong growth in both Payments and Mobility segments. Our Payment Solutions grew 10.2% year-on-year to EUR79.8 million supported by strong growth in toll revenues, which benefited from new CO2 charges in Germany and Austria as well as double-digit growth in Payment Solution trucks. Mobility Solutions grew 31.3% year-on-year to EUR 61.3 million, driven by continued growth across all the mobility products. The additional 2.5 months from Inelo in 2024 is included here. Adjusted EBITDA grew 18.2% to EUR 59.4 million despite higher-than-anticipated credit losses with a margin of 42.1%, and I'll go into more details on this shortly. Our adjusted profit before tax has decreased compared to last year, and this was due to a higher debt resulting in higher interest costs. At the full year, we presented this slide for the first time, which shows you the different products' change in revenue growth in the first half of the year. As you can see, we saw significant growth contributions from almost all of our products with Inelo's contribution mainly reflected in fleet management solutions and work time management. Payment Solutions revenue growth is mainly driven by toll primarily due to the near doubling of the German toll prices. Energy net revenue is essentially flat, driven by lower unit price, but with the benefit of higher volumes in line with our strategy. With the diversification of our revenues, Mobility Solutions now contributes 43% of total group net revenues, up from 39% last year and 29% before we acquired Inelo. On a like-for-like basis, assuming Inelo had been acquired on the first of January 2023, net revenue growth was 9.6%. As already mentioned, adjusted EBITDA grew 18.2% to EUR 59.4 million. As you can see from the chart that despite revenues growing 18%, we have been disciplined with our OpEx costs. Of the EUR 9.1 million increase in operating costs, EUR 5.2 million relates to the annualization of Inelo. If we look at EBITDA on a like-for-like basis and include the annualization of Inelo of EUR 4.4 million and exclude the EUR 6 million FX gain last year as well as the commercial settlement of EUR 2.2 million this year, EBITDA grew 17.6%. In order to attract and retain the best people, employee costs increased by 5.8%, technology expenses grew 8.9%, mainly related to technology transformation and cloud transition, whilst other operating expenses grew 10.8% mainly due to the Inelo acquisition. As I've already mentioned, we have seen an increase in credit losses, mainly due to high insolvencies across the CRT sector in markets such as Poland, Romania, Hungary and Portugal. These have essentially affected small- and medium-sized businesses who often generate very small margins. Our credit loss ratio has increased slightly from the end of December from 0.3% to 0.4%. However, our receivables portfolio and cash collection remain robust. And just to remind you, we calculate credit losses against gross revenues and total volumes, not on net revenues. With our CapEx transformation program now complete, our overall CapEx spend has reduced. We are now further along in our integration phase and have started to allocate CapEx in line with the new integrated platform priorities. As you can see, a large part of our CapEx is spent on existing products, which are being integrated into the Eurowag office. We continue to implement new technologies in the business to improve Eurowag systems and processes as well as build our core data platform, which will be a key part of the Eurowag's office and our ability to create AI tools for our customers. With the acquisition of Inelo and WebEye, our OBU CapEx investment has risen as a percentage of the total CapEx spend. As you can see from our performance in fleet management solutions and toll, these OBU devices are important growth drivers for our business. Our CapEx target remains unchanged, and we expect CapEx will fall to around 10% of net revenue as we invest in the development and improvement of our platform and as we continue to reduce duplications across IT, hardware and technology processes. If you exclude the EUR 3 million final tranche from our transformation program, CapEx was around 12.5% of net revenues in the first half. This slide shows that we continue to focus on reducing our net debt and a 0.3x reduction in our net leverage in the first half is pleasing. This has been driven by EUR 50 million of cash generated from our operations and the initiatives we've implemented within the business around managing our working capital. These initiatives include looking at both our customer and supplier payment terms across the fuel and toll portfolios as well as improved ways to finance our working capital to factoring facilities and reverse factoring. We have provided in the appendix of this presentation, an overview of our working capital movement as well as the gross revenue in toll volumes, which gives you a better view of our payables and receivables. As a reminder, we guided around EUR 35 million of deferred considerations from acquisitions to be paid in FY '24 with EUR 8.2 million paid in H1 and the remainder in H2. I expect little movement in our net leverage ratio at the full year. We remain confident that we'll fall within our net average range of 1.5 to 2.5x in FY '25, as previously communicated. In the first half of the year, we made some amendments to the cloud finance facilities. We extended the maturity date of our loans from the second half of '27 to the first half of 2029. This enables us to reduce our quarterly installments, which gives us more flexibility with our capital allocation should we need it. We also extended the permitted share of the revolving loan within our uncommitted facility from up to EUR 25 million to up to EUR 40 million. Finally, we added an incremental facility of $40 million of revolving loans and EUR 10 million of bank guarantees, which are there to support the enhanced size of our business operations following our recent acquisitions. With our performance today, we are reiterating our medium-term guidance. We continue to deliver strong results despite the headwinds we see impacting the European CRT industry. This gives us confidence in delivering mid-teens revenue growth in the near term, with adjusted EBITDA margin stable around 43%. As I mentioned before, we expect our ordinary CapEx spend to be around 10% of our net revenues, and we expect our net leverage to remain just above our net leverage target range of 1.5 to 2.5x falling within the range in FY '25. With that, I'd like to hand over to Martin to a more in-depth view of our strategic highlights.

Thank you, Oskar. I know you have seen this slide a few times. However, I'd like to use it as a reminder where Eurowag is positioned, particularly now when we've acquired a range of products that possess machine-critical data, which our customers use on a daily basis to operate their fleet. We are shifting to the center of the commercial road transport industry, which is the best position to help our industry to become clean, fair and efficient. We have served this industry for almost 3 decades and are well aware of the challenges our customers face. I will name a few as a reminder. Around 90% of trucking companies are small SMEs with on average 7 trucks in a fleet. Every journey requires 30 administrative tasks. And because they are not fully integrated digital platforms yet on the market, only 13% of companies are fully digitized, mainly the largest companies. With regulation increasing, small SMEs are struggling to keep the banks with reporting and general admin. And finally, the lack of digitization and connectivity within trucking ecosystem means 30% of the trucks on the roads are empty with heavy environmental impact. Taking all this into account, we have created industry first integrated platform, which will gradually but fundamentally transform the way how our customers are operating and will enable them to be more efficient, streamlined their operations, grow revenues, improve their cash flow and accelerate their journey to a low-carbon digital greener future. I've been talking for the last year and a half about integration and transformation of our business. After many acquisitions, the business started its new journey at the start of last year, making sure we integrate our people, processes, technology and most importantly, data. Having made good progress last year, we have continued to deliver the goals we set for the business. We are talking about bringing our sales channels together direct, indirect and digital. As part of this process, we have appointed a new Chief Commercial Officer, Francesco Nazzarri, who comes with many years of experience of guiding companies through commercial transformation, particularly building bundled product offerings for the customers and building commercial omnichannel sales engines. This is a key for our new platform, which includes new pricing and proposition models. Integration of Inelo and WebEye continues, aligning all the sales, technology and product teams. Customer data migration has already started, which enables us to give you a better KPIs this year, and we have a clear product road map as to when customers from acquired companies will be benefiting from Eurowag office platform. With the scale of change this business has gone through over the last few years, I thought it was important to appoint also a Chief Operating Officer, who can help us strengthen our operating model across 19 countries and streamline our back-office processes and making them fit for a scalable omnichannel experience. I was pleased when Felipe Alves accepted the role and has already initiated a company-wide projects to align all our operations. Part of our purpose is helping the industry to become clean. By that, I mean to reduce the amount of carbon emissions the CRT industry produces. We can support our customers to a greener future and as a part of our decarbonization strategy, we want to be able to offer our customers fuel alternative and reduce carbon intensity by efficiency improvements, such as better routing or driving style. We have made a great progress here and I will come back to talk about it a bit later. This slide, you are all familiar with -- which I like to use as a reminder of various layers of the platform. The first layer is about user experience. We usually talk about 3 personas: the owner, dispatcher and the driver. They all have different needs from the start to the end of the loads journey. By using our application, they no longer need to use multiple systems log-ins. They only have one user experience. All their systems, data and processes are in one place. These pictures are usually on a call 24/7, 7 days a week. They can now manage their [indiscernible] through one application at their pocket. The second layer and a key element of how we will bring this platform to our users is represented by our sales channels. As you know, we are working on bringing all of them together in omnichannel experience using fully end-to-end digital processes. I will come back to this on the next slide. The third layer is represented by all products and services. All of them will eventually will be available on -- in the Eurowag office application. The last layer and the most important is indeed technology and data. All of our products and services allow us to capture a unique set of data from our users in one place. No one else in the industry has this. We can see our customers' journeys from beginning to the end, and we are able to use real-time data to empower our customers to manage their operations more effectively and efficiently. Just briefly touching on our omnichannel. This is a well-known business strategy that unifies all sales channels and integrates customer journeys, both online and off-line. The industry we operate has traditionally relied on a direct source approach. Our growth in trucks is testament that digitization of sales is the right direction, and it's happening at the right time. As you know, we have transformed into a tech-driven business. We are, therefore, focused on growing our digital sales channel which will be soon enhanced and made fully end-to-end on a new platform as part of new generation of platform front ends. The other sales channel we have been working on this year is indirect sales channel with our 3 OEM partnerships and which will be centered around cockpit application of Eurowag office installed in every new truck. The omnichannel approach will accelerate the acquisition of new trucks, facilitates faster cross-sell and as well as reduce our cost to acquire. Almost a year ago, we held our Capital Markets Day where we gave you some visibility of the Eurowag office and the milestone we needed to achieve before we were able to launch it. We have a very detailed road map. However, to keep things simple, we summarized what next 18 months will look like. Our teams have been incredibly busy this year. And as you can see from the slide, we have already started to migrate customers onto the platform. Today is the launch of the platform, we decided to migrate the specific cohorts of customers from various products onto a new platform, get their honest feedback about the user experience, update the features. And then we have continued to migrate the remaining customers in a phased approach. For selected fleet management customers, we have given the option within a new Eurowag office application to switch back to their interface, which gives them ability to adjust to a new user experience over the time. What, however, we have seen is that not many are switching back. Our customer care teams are not facing material volumes, of course, from customers who don't understand the new features. And therefore, this is a great proof that the new function of these and user experience is simply better. As you heard on my initial slide, our new Eurowag office platform is in use by a large number of existing customers already. And these migrations give us great confidence that we are still on track to start introducing Eurowag office to a new customers in Q4 this year. Here on this slide, I would like to remind you why this platform is so important to our customers and the industry. I talked about the challenges at the start of my presentation and how the lack of digitization was the root cause. Eurowag office solves all these challenges. The immediate outcome for customers are as follows: simplicity and convenience, data and systems all in one place, better management of their operations, and therefore, reduce their cost base up to 10%. We help solve their working capital programs, which means better cash flows, and we can enable transition to a low-carbon future, which means a better life for all. I will come back to this statement on the next slide. And in midterm outcome for entire industry is redefining the way how trucking companies operates by total digitization of their operations, better connectivity and relationships with the rest of the ecosystem, such as shippers, regulators and road service operators. And finally, making trucking attractive again by fair distribution of financial economics across the whole ecosystem. We can talk about clean, fair and efficient industry result focusing on sustainability. We feel gifted in Eurowag to have an opportunity to do so much in this sense for the industry and the planet. And I'm always happy to see the progress we are making. We have expanded our alternative fuels network over 1,500 alternative fuel stations in an effort to support our customers' journey to a low-carbon future. We have become the first e-mobility service provider for CRT sector in Europe in partnership with Last Mile Solutions, the leading European roaming platform for E-Mobility and where Eurowag previously acquired the stake. Drivers has now -- have now access to over 600,000 charging points across Europe where they can use our card as well as reserve their slots for charging. Now let's take a step back and think in particular about complexities of e-charging. It's another burden for dispatches. During drought planning, they must manually calculate the following factors accessible only through isolated systems. First, energy and toll costs, overall time of driving, obligatory resting time, loading and unloading dock schedules, actual traffic conditions and finally, available slots for charging. This is very hard to achieve, almost impossible in an analog world. The data and AI on our platform will solve that instantly is the most effective outcome. And another great example of what platform will be able to deliver in the near future. I hope that purpose of clean, fair and efficient is making more sense to you now. At our Capital Markets Day, we discussed the need to change our KPIs to better reflect our updated business model. And although we are not quite at the point where we can disclose all the new KPIs, I wanted to give you some color so you can clearly see the progress we have made. These numbers are estimated still. And by the year -- by the end of the year, our data will be consolidated, and we will be able to give you actual numbers and report them going forward. Firstly, total number of active trucks, we chose our scale and key revenue driver for our business. We have said our ambition is to reach 1 million trucks, while today, we are at almost 300,000. Secondly, number of products per truck, which shows the opportunity for cross-sell and upsell as well as significant is -- as well as significantly reduce the churn. Today, we are between 2 to 3 products per truck. With the acquisition of Inelo and WebEye, the number naturally, the number of products naturally drops. This is the large customer base coming in, but this will increase back again this continuous cross-sell. Customer NPS is an important KPI as it helps to learn how our customers are happy with the user experience and the value we provide. Currently, customers' NPS is around 40 points, which is well above the industry benchmark. And as more customers move to the platform, they are taking more bundled offers and more of our subscription. We are currently sitting at 28% of our revenues being subscription type. And finally, in a summary, we continue to deliver strong growth despite a period of lasting unhelpful macro environment. The phased rollout of our new platform is continuing according to plan with more and more unique features and functionalities added over the time as well as customers are migrated in the [indiscernible]. As we look towards the year-end, we will continue to focus on customer migrations as well as opening the platform to new customers. We will continue to integrate our people, technology and processes so we can fully accelerate extracting of synergies. And our priority remains to move back into our net leverage range in between 1.5% to 2.5%. With this, I would like to open the session to Q&A. Thank you.

[Operator Instructions] We'll take our first question from Gautam Pillai of Peel Hunt.

Great. You provided some encouraging milestones on the development of the platform. Are there any early learnings or feedback you can share from the migrated users on the platform now? And an associated question to that would be, will there be a different pricing plan for new customers at platform launch, which is more subscription-linked? And second question, perhaps for Oskar, really strong cash flow and balance sheet development in the first half. you did touch upon in your prepared remarks, but can you give more detailed color on the steps you have taken to optimize working capital? And do you see this as sustainable?

Thank you, good morning, Gautam. Thank you for great questions. When it comes to experience and the feedback and the early learnings, indeed, we meticulously follow the feedback, both in Eurowag navigation application through the Edge Store and Google where we see extremely positive evolution and our new updated application. I mean the customers which were migrated from Road Lords, which was the pilot, which we done already 2 years and where we gained 200,000 users, and we migrated them already all successfully to this front end of Eurowag office and we see great, great results well over 4 points in rating, which I think is fantastic. Secondly, we measure in different ways, how our fleet management customers. I was mentioning in my intro that we migrated 7,000 already of them. And the first, of course, very positive surprise was that really very little number of people are going back to their old environment, which was much better than we expected. So it's just a testament really that the new environment is much better, new functionalities. Some of them are really revolutionary. So customers are simply happy. So I can assure you that there is every day intense work on the feedback to ensure that as we are stepping into the next phase is that we are reflecting it. Other than that, I would not mention that something would surprise us. When it comes to pricing model, conceptually, we are hedging to 3 models, premium, which we already partially applied, and we will be extending it with Eurowag office. The second one is pay-as-you-go and you can think about pay as you go as actually current system where customer is coming and selecting what he or she wants and then paying per the service, which was ordered. And then the last one, the newest one is subscription. Subscription model is known in the industry, but more for the software services, not for the entire package for the broader bundles, which Eurowag is preparing. So this is just where we are heading to. How we will be rolling out is that -- this the Eurowag office, we are launching extended premium. We will be providing by during the Q4, as I was mentioning in the presentation, we will be opening platform to new customers, for pay as you go. And the subscription will be only launching at the Q1 next year, at the back of Q1 next year. The reason, Gautam, is we need to really let customers to absorb all these novelties, which we are introducing in the market. Really platform is revolutionary from many angles. I think they bundle many things together. The user experience is new. And as well the pricing and model is totally new, especially the subscription part. So that's why we consciously selected the state approach in order to be able even to learn gradually and from each addition and not to mix it up because then it will be difficult to differentiate why customers are eventually struggling. So that's our approach when it comes to pricing. And with [indiscernible], I hand over to Oskar.

Good morning, everyone. Thanks, Gautam, for the great question, as usual. Cash flow, yes, we're pleased with it from the first half of the year. As you all know it, this is a very complex area, managing working capital, in particular, which is where you see the largest improvement coming from. What are we doing? I guess I had some opening remarks, but I'll give you a few examples of how we monitor, for example, receivables. Average receivables balance per customer is around EUR 15,000. So you can imagine, if you look at Slide 29, at the back end in the appendix, you can see that with the quantum of receivables is very large. And if the average is EUR 15,000, you can see there's a lot of work that goes behind it, using a very focused treasury team in collections, late collections, we monitor usage of customers. And so as soon as we see a drop in usage, for example, in volumes of fuel used by customer, it's a warning sign for us. And that also indicates to us that there may be some financial challenges for the customer. And so you proactively start monitoring together with the commercial team to see [indiscernible] financially sound with the customer? Do they need help? What other products can you offer them in terms of financing, et cetera, to alleviate some of those pressures and sometimes save their financial well-being. We've put in late payment fees just to encourage people to pay more on time. But fundamentally, it's the basics, getting the terms and conditions with our suppliers and customers right, trying to match the payables and receivables to try and get an overall balanced working capital. But as you've seen, just receivables themselves increased by EUR 63 million from the beginning of the year, mostly as a result of the increase in toll volumes. So it remains a challenge. And on the right-hand side of that chart, 29, you can see the total gross revenues for the half year was EUR 1.9 billion, that's what we're dealing with. It's a very, very large quantum of revenues, which equates to our working capital. So it's -- that's the basics, Gautam, but it's continuous. We can't let you ride off the boat.

Our next question is from Hannes Leitner at Jefferies.

Maybe just because you mentioned here on the credit loss, could you tell us what the total volumes were? And then how long do you expect toll collection given the CO2 regulation change to be a revenue driver? That's the first question. And then the second one, maybe you can just help us looking into second half and then into 2025 in terms of your growth algorithm, where from which part, is it the full payment, which should be recovering? Or is it toll roads to even accelerate? And then what we -- how should we think about mobility? We know it's very lumpy on the OEM side. But what have you seen on the current -- on the ongoing flow business. And then I have a short follow-up.

So credit losses, yes, it is a -- what we've seen is clearly linked to those pressures I sort of alluded to earlier in terms of the cash flow discussion we had. First of all, in terms of volume on Slide 29, we show you in the blue color, EUR 0.7 billion is the toll volume. So it's a very large quantum, and you can see it's increasing from last year half year, and it will continue to increase. If you look at legislation, if you look at Europe, other countries, Germany and Austria were the leading countries in using the CO2 as a charge. And our expectation is that other countries will follow. And if you look at market reports they are all indicating that to a certain extent that most of Europe are considering increases in similar fashion, for example, Hungary is probably going to follow suit soon. But -- so it is something that will continue to grow is the toll. In terms of credit losses, the most, if you look at where the credit losses are coming from in Eurowag, it's as stated in the report, Poland, Romania, Portugal, these are the countries that have struggled the most in terms of macro headwinds. And it's -- if you look back in history, the average for the last 6 years of credit losses is about half of where we are today. So it is a significant increase in the current environment. In terms of looking forward, we believe we are now at a trough in terms of those headwinds, inflation starting to come down. Interest rates are starting to come down what our customers are facing are higher labor costs, higher fuel costs, insurance costs for their vehicles. So they have -- and then on top of that, you add demand that has been challenging over the last 12 months, as you know. So that is what has driven the credit losses. In terms of the growth, would you like to take that, Martin? [indiscernible].

Growth in mobility, if yes. The mobility underlying growth is healthy. We are very, very happy this year and we do continue. However, if you look at what is our [indiscernible] of the platform is the cross-sell, cross-sell and upsell. So because if we would be just replacing mobility solution for mobility solution. This would be at first tough competitive battle on a market because almost every transporter has a fleet management solution with the exception of truckers, which are owning 1 truck or 2, 3 trucks. So [indiscernible] we are coming is that we are bringing the product, which is integrating fleet management data with the other, so there is additional value. And for Eurowag, the benefit is that we are immediately cross-selling. And we've seen in Czech Republic and Slovakia already in many years, how beneficial it is on unit economics of customers whenever we cross-sell the -- whenever we are having acquiring fleet management customer and then cross-selling other products, how beneficial it is for unit economics. I mean net revenues -- average revenues per truck and declining chart. So this is the key cases, which is also in value creation plan going forward. So I would -- how I would think about mobility to continue in line with what you've seen so far but the major benefits will be from synergies from cross-sell, which will further accelerate our overall revenues.

Great. And then just take the little follow-up question I had. You showed that you have now 280,000 total trucks roughly per estimate. It's clearly not a confirmed number yet. But then in Capital Markets, you said back then, you had 250,000. So a quite nice increase in trucks. But then when I'm looking at the truck profitability, just implying the full year guidance, the profitability or the revenues per truck haven't really increased yet. Is this because of the cross-selling? Because we are just on the early days of the cross-selling and upselling? Or is this also partly the macro environment where just like trucks just make less mileage and less revenues? So is it -- is it self-inflicted? Or is it the market?

Great that you spot that. And I think that this is absolutely critical to clarify because if you think about for example, large acquisition like Inelo. It's a phenomenal opportunity because we immediately got almost 100,000 trucks, but their average revenue per truck was much, much lower than Eurowag because they were eventually having 1 or 2 products. So we are -- whenever you are bringing such a portfolio into Eurowag Group, of course, it will initially decline the average revenue per truck in entire portfolio -- in consolidated portfolio because it then paid time to cross-sell and to bring these trucks, let's say, from Inelo from what it was the same [indiscernible] to bring them on the profitability of all the cohorts. So we would need always when we will be demonstrating -- when we will be showing the total number of trucks, average revenue per truck, et cetera, you would need always to provide further details and transparency how it's influenced because it might at times to drop exactly because of a consequence of acquisitions. But of course, overall target is every cohort to, over the time to cross-sell and to achieve higher net revenues per truck, which we proven already with our platform and key cases of the platform is that the increase or multiplying the initial ARPU average revenue per truck will be accelerated.

Our next question is from Mark Hyatt at Morgan Stanley.

Congrats on a solid start to the year. So I've just got a couple of questions. The first one on the outlook and the current environment. I'm just curious to hear a bit more around what you're seeing in the market. You noted in the release that you're seeing some early signs of recovery. Just could you tell us a little bit about what indicators you're tracking most closely there? And how much conservatism have you got baked into your guidance? Or do you assume that the market remains subdued in the second half? Or are you modeling a kind of gradual recovery in terms of what you're seeing most recently? And then just quickly, a follow-up on the platform. I know you mentioned that subscription won't be rolled out until end of Q1 next year. So as we think about the benefits from the platform rollout, should we think about this as more of a second half '25 story or even an FY '26 story? Can you just maybe clarify some of the timings around the benefits that you expect to see there?

Thank you, Mark. So I will start with the market outlook, and I will ask Oskar eventually to complement. How I would recommend to look and that we tried as well previously, how to look on the health or dynamics of the trucking market itself is there are 2 metrics. One is overall volumes, which is very much a function of GDP. So whenever GDP moves, 1%, trucking is moving as well, 1%, 1.5% down or up. So this is -- here, it's very much predictable, and you have all access to macro data. What was happening specifically in Poland, which Oskar was referring to was that the situation was worsened by the Ukraine war indeed because there was a huge transport in between Russia and Western Europe, which was very much secured by Polish drivers. So therefore, Poland got 2 blocks, not only macro, which was hitting the Eurowag, but specifically Poland gets a double hit of that. But overall, the volumes of kilometers is pretty stable with a few percentages up and there as far as GDP. What is, however, more volatile is the financial health of trucking companies. And that's, again, what Oskar was mentioning that in long-term average, we are 0.2% of gross revenues or total cost of risk. And nowadays we are in the double. We've seen that many times in the past. I've seen it in 2008 crisis, we've seen that industry is going through the cycle. And main driver behind the cyclicity of the bad debts and simply difficulties of trucking companies is related very much to spot market. Because spot market as the trucking industry is very much inelastic, so spot market is getting very much hit because whenever there is slight access of supply, immediately, the spot market is dropping, while spot market is making bulk of profitability of trucking companies. Overall, volume is typically 1/3 is spot market. Companies are realizing deals on our spot market, 2/3 is long-term contract, but long-term contracts are securing only the basic income and where they really make profitability on a spot market. And what you can see from public data, the spot market really collapsed 18 months, 24 months to 18 months ago. And now we see indeed recovery in spot market, which give us hope that the market that is sustainable and that we are coming back again to normal. So this is early signs, we remain cautious. But these signs are, of course, very positive.

There are many other factors we look at, Mark, again, data points. They're not necessarily specific to the territories. Remember, our customers, we are quite specific to the countries they originate from and then they transfer it to throughout Europe. So it's maybe not the health of where the customers base, for example, Romania, where they're traveling through to Germany, Poland. So -- but what we look at, for example, is also load capacity at the highest level. And that's another small market data point that could indicate a change in circumstances. Just to give you a little capacity in June 2022 was 82%. In June last year this time, it was 59% and today, it was 78%. So there are certain green shoots. But again, are these going to continue throughout. And I wouldn't say that we've been overcautious and we just feel we're being realistic in our outlook.

And last question, Mark, and I believe that this would be other interest as well as others, the benefits of the platform. The subscription is just 1 of the products which Eurowag is seeking because, of course, subscriptions are on for the customer eventually attractive because they are bundling multiple products for Eurowag because this is -- this generates more sustainability. But the platform itself is seeking more other 2 key benefits. At first, is designed already for omnichannel experience. And as you learned, multiple times, we were repeating that regardless what trucking company was buying, be it truck or financial service all as it was direct cells. So the platform is built to cater for omnichannel experience which is scale and here is because scalability, about boosting our ability to acquire higher number of trucks that we were able so far through direct sales. So this is 1 key metric. That's why we speak about our North Star being number of trucks. And this does not wait for subscription. This is really about opening the platform to new customers, which we were commenting already that it will be opened during already Q4 this year. And the second metric, second key value driver platform is designed for is exactly cross-sell because it's a different story if you have different environment, different pricing, different salespeople, different brands, et cetera, and when you are bringing one single experience, which is saving time, streamlining and providing additional value to the customer. So -- and this is -- again, this is not subject to subscription. We can still sell our products on the platform in pay as you go in integrated fashion. Subscription is, let's say, another layer, which is further stimulus, not only but further stimulus, how to drive cross-sell. So definitely, we shall see the benefits of platform during 2025. Although we were always cooling expectations because this is a totally new experience for customers. We are totally -- we are pioneering that nobody in front of us was there. That's why we held our outlooks midterm and near term. But of course, we have bigger hopes than presented, but this needs to be first validated.

There are no further questions on the Zoom webinar. We will now address the questions submitted via the webcast page. I will now hand over to Carla Bloom to read out the written questions.

We have 3 questions online. The first one is about the ERP system. So what are we rolling out in terms of ERP, what type and actually, the benefit that is expected in terms of [indiscernible]. And the second one is actually about the platforms. Martin, you've obviously spoken about the benefits it will give to our customers but the specific question is actually more about Eurowag. I think you have answered some of those, but just to kind of summarize what it does for Eurowag specifically. And then the final one, and I hope that I've interpreted it right, that it's more about the change in our sales profile from today, which is very direct. So door-to-door speaking to our customers and actually, once then it's integrated into the truck, how does that change our sales model. So again, we obviously did our slide today on our omnichannel. So maybe just a little bit more clarity on how we're moving our commercial sales to more omnichannel. ERP, maybe Oskar.

Okay. Thanks, Carla. Yes, it's SAP that we're rolling out across the group. And as every ERP system. It's complex. It's the business that we operate in is fairly complex, as you know. And hence, we want to not only have an ERP system but simultaneously, and Martin mentioned it right at the beginning with the Chief Operating Officer joining us is looking at our operating systems and processes, procedures supported by an ERP system and that is vital for us. And our ERP system is not just reporting. It's a fundamental foundation, for example, in the platform that we are building, particularly in the building, the e-wallet section of it, it is the foundation of it. How you link with your customers, your -- the accounts receivable balances. All of that is linked to the SAP. So it's a fairly complex exactly what it says on the box enterprise-wide system. It's not just about financial reporting. We're rolling out in phases, so it was core Eurowag first. Of course, we need -- and as per the notes in the RNS, we have quite a way to go for the whole business. So including the acquisitions we have to bring that all into the same platform, the same SAP system over time. But where we are, we've got a number of phases and that we planned it in terms of project names, alpha beta gamma, how we internally monitor it. But it's a fairly complex process, but it's very complementary to the platform. So they go hand in hand. So that's why it's quite a slower process and perhaps just rolling out standard ERP. So it's looking at operating systems, procedures as well as the platform linked to reporting at the same time.

When it comes to benefits I was already mentioning, so just to come for completely designed for omnichannel experience, so really to provide scalable sales engine. And we see simply that customers are absolute ready now for digital experience, although they were not experiencing it in other industries, yes. So we know that this is right time. All the indicators, and I was mentioning a few metrics are showing that. Secondly, it's indeed cross-sell, platform is offering multiple levers to cross-sell customers, unlike from traditional direct isolated product sales. The next one on top of what I was mentioning is differentiator, extremely important thing. And I would mention it in 2 aspects. First, whenever we are offering these products together, we are able to design unique features somebody would call it killer features, which simply stand-alone products cannot simply offer because they are not having access to other products. So these features are, in fact, something what humans were now doing manually and we are able to automate these processes and streamline to make it much more enjoyable user experience and save the cost. And this is a key differentiator to single product providers. That's why we strongly believe that in longer term, single product providers of services will have great difficulties to sustain their market positions, which of course, will, on the other hand, open opportunities for Eurowag, should we come back to acquisitions and therefore, be able to acquire single product portfolios like we did in the past. But this is a longer-term future and not for now. The second testament of differentiator or a testament is that OEM deals, truck manufacturers deals were achieved not because of 1 product, but exactly because we have a suite of products, which is coming together, including the future proof, I mean in terms of sustainability. So OEM deals were clearly communicated to us that our proposition is unique on our market, and therefore, they were signing deals with us and not the single product providers because this is business as usual, nothing new. However, we are providing completely new experience on completely new value. So this is already testament but the platform integrated approach is absolutely right thing. And I do hope that we will see more and more such deals in the future. And last thing, which was not mentioned, and these are synergies. Nowadays, we have multiple fleet management solutions, multiple back ends, multiple hardware, et cetera. And of course, bringing it under one umbrella is allowing us to really benefit from synergies. And that's why we are speaking with confidence about midterm guidance of increasing profitability to high 40s. So these would be, again, 4 key benefits for Eurowag of coming from Eurowag office. And last thing, when it comes to omnichannel experience, direct sales approach is, of course, very costly. And we are hitting the ability to really scale across Europe because our playground is Europe. We are very strong in Central and East European [indiscernible] very good reasons because the international trucking is mainly happening from these 2 hubs. But indeed, the rest of Europe is as well attractive and still provide lots of opportunities. And for us, it's much more effective to deploy omnichannel experience, betting on a digital as well as deals with truck manufacturers where we will be leveraging their brand and their dealership networks, which they, of course, have established and long-term functioning in all the countries across Europe. So we believe that this is the right formula. And just to make sure that execution is seamless, that's why we hired Francesco Nazzarri. I was commenting clearly Chief Commercial Officer coming previously from experience and from other companies. And therefore, we are very confident that we will be able to execute and bring as well omnichannel experience into excellence.

Great. Thank you, Martin. And those are all the questions we have today. Martin, maybe just to hand back to you for your final quotes before we close the call.

Yes. So first, I need to remind that our midterm guidance, they're unchanged. You see our growing confidence even -- which is stemming from the numbers which we presented stemming from our confidence in the launch of platform from the early signs, which we've got early feedbacks. So this is the first thing. Secondly, you see that Eurowag is really on an inflection point. We were investing many years into products. It was a complicated journey to expand beyond one product line into multiple product lines. It was difficult to change everything in the organization. But now we see that all the things are coming into fruition. So I would like to thank you for your attention, for your trust into Eurowag and I believe that you can expect, again, good news going forward. Thank you very much.

Thank you for joining.