Wiit S.p.A. (WIIT) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Wiit First Half 2021 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Cozzi, CEO of Wiit. Please go ahead, sir.

Good afternoon, and thanks, everybody, for joining the Wiit conference call. Board of Directors, this afternoon approve the results of the first half 2021. You can see -- you can follow the presentation with the [indiscernible]. Unfortunately, meeting later, but I think you can see the presentation. Starting for the highlight. Strong growth in terms of sales. Sales grew 52% compared to the last previous year, thanks to organic growth. The organic growth remained strongly later have a specific slide in the sale, but organic growth was 11% in terms of revenue, remain strongly. Thanks to the myLoc contribution, I remember that the consolidation of myLoc business started in the last quarter of last year. And for this half year, we consolidated -- we have a full consolidation of the German business. Total extensions, upselling and new logo. In the first half, we continued to grow to achieve a new customer in Wiit and in all the company acquired. EBITDA margin up to 40% increased compared to last year. So consolidated revenue was EUR 45 million compared to EUR 23 million last year, plus 52%. Consolidated EBITDA were important, EUR 14.2 million compared with EUR 8.2 million last year, plus 72.8%. This is very good results. It's mainly driven on the organic growth, the scalability of our business and very, very positive contribution to profitability by myLoc. Margin revenue overall is 40%. And later, we have a specific breakdown of the single company with the margins so you can see all the company acquired improved their EBITDA margin. Consolidated adjusted EBIT, EUR 7.8 million compared with the EUR 4.3 million for the first half of 2020, plus 79.6%. EBIT growth faster than EBITDA. The EBIT margin was 22.1% of the revenue. Adjusted net profit, EUR 4.3 million compared with EUR 3.2 million last year, plus 35%. Net financial position net debt included the impact of the IFRS 16 application in terms of rental space for approximately EUR 8.6 million. The debt was EUR 72.6 million, lower than EUR 95.6 million of end of last year. The main reason is the capital increase for approximately EUR 25 million, the agreements that we closed in June this year and a good cash generation. And in this net debt, we don't include the value of the treasury share. And if we take the market price of by end of June was EUR 28.7 million. But if we consider the daily market price of the Wiit share that this value now is over EUR 42 million. I then jump to the Slide #4. Revenue rose 52% from EUR 23 million to EUR 35 million. EBITDA adjusted growth more faster, the revenue from the scale up of the business from EUR 8.2 million to EUR 14 million, EBITDA margin 40%. EBIT margin growth from EUR 4.3 million to EUR 7.8 million, with EBIT margin of revenue 22.1% and EBIT growth 79%. Net profit adjusted EUR 4.3 million compared of EUR 3.2 million last year. In the adjusted, we exclude all the nonrecurring items like M&A, consultant costs, due diligence costs, stock option plans, in this case adjustments were paid for earn-out. Net debt, EUR 72.6 million. And in this value, we don't include -- I repeat, was important, EUR 42 million of the actual value of the treasury shares. Jump to financial highlights of myLoc. MyLoc is our first broad acquisition. We are very happy to share these results because we demonstrated a very, very good deal in Germany. The company is running very well. In terms of revenue, in terms of EBITDA margin, is impressive, 49.5% is higher than Wiit and the Wiit is a sure good performance in terms of profitability. EBIT margin 29.8%. And after we can discuss about the book in general, the sales of the first half confirm that the trend achieved in the first half of 2021. Revenue adjusted EUR 35 million, 11% is organic growth. And this trend will be confirmed because we have the best performance in terms of bookings in the period of January, from January to August, we have the highest value in terms of booking over the last 3 years. So at the moment, our perspective for the second half is, it's continuing a good organic growth. But we continue to focus on higher added-value services and reduce our sales of hardware or in general service with low value. And the cross-selling in the acquired company will be a very, very good result because the [indiscernible], we closed a lot of contracts, for example, in the cybersecurity business or in cloud space and the customer acquired by the acquiring company. MyLoc contribution in terms of revenue was EUR 9.6 million. You can jump to the Slide #7, you can see the EBITDA was down. And overall, I repeat, EBITDA growth from EUR 8.2 million to EUR 14 million. The concentration on Cloud services, I repeat, reduced low value service or product sell, increased EBITDA margin. Wiit itself from 42.9% to 44.5%. Matika is the independent of location acquiring company chooses to go. When we acquired this company, it's running 80% EBITDA margin. Now changed from 27% to 33% EBITDA margin, very, very jump, we are very, very happy. Etaeria is the last acquisition in Italy, January last year from 19.5% to 22%. And our outlook for Etaeria to improve -- additional improved margin in the next 2 years because the migration of all the facilities is starting in July and this positive effect we have full achievement next year. Adelante remained stable with 1% and myLoc is our German -- our first German acquisition, margin growth from 43.9% to 49.5%. The adjusted EBITDA is related to cost of work integration, general M&A, consulting, lower to do the due diligence and for 200 [indiscernible] cost related to stock option plan and stock grant approved in the shareholder assembly in the early May of this year. EBIT adjusted growth from Slide #8, from EUR 4.3 million to EUR 7.8 million and net profit increased from EUR 3.2 million to EUR 4.3 million. In these numbers, we don't include a possibility to improve the new patent box, the renewal with the tax office is ongoing. Our expectation is to close the process by the end of this year. But [indiscernible] approach, we don't consider a possibility to reduce the tax rate in case of a new agreement with the tax office. With that, [ EUR 22 million ] the main topics is capital increase EUR 25 million in June, strong operating cash flow. CapEx in this period -- capital expenditure was positive EUR 5 million and the mainly relative of the booking of the organic growth. I remember the company use -- spend approximately EUR 3 million yearly for matters of CapEx, and the large part of the CapEx is relative to the growth is total build-up CapEx. The treasury share buyback in this period was EUR 4.6 million, and the dividend payment, EUR 3.2 million and the payment of the earn-out and minorities EUR 2.4 million. Treasury share value at the end of June was EUR 28.7 million, not included in this cash and actual value is approximately EUR 42 million. Okay. We are now ready for Q&A session.

[Operator Instructions] The first question is from Giorgio Tavolini with Intermonte.

My first question was regarding the convertible bond issuance that you have just announced for EUR 100 million -- up to EUR 150 million. So I was wondering if it's just for refinancing purposes or if you are, let's say, increasing your firepower for additional M&A? The second question is regarding the organic growth. I appreciate you registered 11% organic growth in the first half just for double check, is it correct 9% in the second quarter? And the third question here is regarding the Mivitec. So what synergies you expect from -- in terms of revenues and also in terms of cost? You announced the EUR 1 million cost synergies in July. So I was wondering if there are also upselling synergies or whatever? So first one on convertible, the second one, organic growth and third one, Mivitec.

Okay. Thanks, Giorgio. The first question about the bond. First of all, it's not convertible with a senior bond, okay? Unsecured, the maximum value of the approved -- approval by the board is EUR 150 million. And we have 2 user proceeds. The first one is refinancing the existing debt, we want to improve our disposable debt in long term. And the second for EUR 60 million approximately, we have loans to refinance and the residual to finance and M&A. The new M&A, of course. Second question, organic growth, I agree with your predictions, 9% organic will be a good target for the second half. Of course, the first 7 months booking or we can confirm that it's very, very strong. If the booking continuing to go very, very high, we can increase -- at the moment, we confirm 9% of the revenue because we have always a shift from 6 months to 9 months from the booking to the start to billing the contract. The book is very strong. The bookings strong means a good, good visibility of the 2022 year for the second half. The third question about Mivitec. Your expectations on cost synergies from EUR 1.2 million in 2 years. At the moment, we don't expect revenue synergy. We bought a good customer base in Monaco area, one of the mainly manufacturing industry zone in Germany. At the moment, we are building in Germany, a new sales team to start the proposal we sell, we need one is to start the sales of our sales team and skills.

The contribution for the last quarter could [indiscernible] for the second half, cannot be compared to the -- at group level, so significant.

Next question is from Gabriele Berti with Intesa Sanpaolo.

I have just 1 question about financial expenses. There was a big difference between the value posted in the first quarter and in the second quarter. I mean the difference was about EUR 1 million. You posted EUR 1.3 million in the second quarter and just EUR 300,000 in the first one, which is the reason behind that. And then I would like also to ask you. You previously said that the refinancing -- the portion of the bond related to the refinancing of this extinct debt is about, I don't catch the number. Can you repeat, please?

Okay. Starting to answer your second question, we want to refinancing EUR 60 million or EUR 50 million the bridge we received to buy myLoc, EUR 10 million is the part of the pool like we have a user inside a total of EUR 30 million bank alone. So EUR 60 million refinancing and EUR 90 million to finance M&A. The first question about the CapEx.

Financial expense.

The interest paid changed from one to second term. I think the counting of the amount [indiscernible] and second, we check the difference of first quarter and second quarter, 1 second. Okay. The main difference is...

The amortizing cost of market expenses about the loan of EUR 50 million.

Okay. Starting amortizing of the loan and amortizing the interest rates of the new line credit and the payment of more earnout related to more cash in the Matika business. When we bought Matika, we insert -- the total value of the company, including minorities earnout, but we don't include...

It's cashless. So it's not impacting...

Yes. It's cashless.

The acquisition. It's just an accounting. It's just on the accounting.

The accounting and the cost -- the other cost. The advertising cost, 500 and other things...

More interest.

You just see the effect on the P&L, you don't see the effect on the cash flow statement.

And the derivatives mark-to-market of the derivatives.

Okay. We have the mark-to-market of the hedging of the EUR 50 million of the bridge. Okay. The mark-to-market value of the hedging, the main difference.

The next question is from [indiscernible] Investment Group.

First, congrats on a great set of results. I got 2 questions, if I may. First, how would you explain that Adelante margin is not improving in time compared to other companies you acquired in the past? And my second one is, do you expect an acceleration in CapEx spending in H2? As you are planning to build new data centers from myLoc, if I'm right?