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 9 months 2021 Results Conference Call. [Operator Instructions] At this time, it's my pleasure to hand over the conference to Mr. Alessandro Cozzi, CEO. Please go ahead, sir.

Good afternoon, everybody, and thanks for joining in this conference call. And the Board of Director approved the results of the first 9 months of 2021 and you can see the presentation, I send you the last hour. We can start from the highlights. We are very happy in general for all the numbers of the first 9 months at group level. Starting from the consolidated revenue was EUR 53 million compared with EUR 34.8 last year plus 52%. And many thanks to organic growth, I have a specific slide I will give you some information about the organic growth is 11% in terms of revenue, is very, very good. But in general, we consolidate all the business of myLoc we -- last year, we consolidated only the last quarter and this year, we consolidated since 1st January. And as motors [indiscernible] Mivitec, we acquired a company in August and these numbers, we are only 2 months of the revenue. Mainly driven of our compensation, new logo in general, a new customer. Because of EBITDA was EUR 21.8 million compared with EUR 12.4 million of previous year, plus 35% compared to last year. And thanks to the economy scale and for excellent results for the -- by the German business. We have a specific slide about the myLoc business. And the results in Germany was very, very good. The consolidated margin of revenue was 41% increase from 35%, thanks for myLoc business mainly. And the EBIT constant adjusted was EUR 11.8 million compared with EUR 6.4 million plus 83%. The margin of revenue is 22%. Strong improvement compared as the year was 18.5%. Adjusted net profit EUR 7.4 million -- EUR 73 million compared with EUR 4.3 million. We have a specific adjustment in terms of EBITDA, mainly wavering the M&A costs, consultant other cost, one-off cost about the renegotiation of the market. I remember the company issued a new bond in early October. In this balance sheet, we just include the [indiscernible] accounting cost for approximately EUR 1 million for the cost of the bank bridge we closed, the 5 October. And -- in the near position was actually EUR 76.2 million compared with the EUR 95 million. The main impact is the capital increase, we successfully closed in June for EUR 25 million from cash generation, speed out investments in CapEx for total EUR 13 million, including the leasing loan. We have paid treasury share let's say for EUR 6.4 million and we paid dividend for EUR 3.2 million. The [indiscernible] we spend EUR 2.7 million. And in total net debt, EUR 76 million, we don't include the evaluation of the present share in portfolio beside in approximately EUR 39 million considering the market value of 30 September. Then jump to the Slide Page 4. You see the revenue growth strongly from EUR 34 million to EUR 53 million, adjusted EBITDA at EUR 21 million. The EBITDA growth more fast than the revenue because the costs don't grow with the same proportion of the revenue and EBIT growth more faster, 83%. And very important is the increase of the demand of revenue because the CapEx is no higher than the increase of the business. Net profit is EUR 7.4 million, a net debt decrease to EUR 76 million. I won't jump direct to the 5. The myLoc bring down, I would like to give you this information because it's important in the first result of myLoc and [indiscernible], revenue was EUR 40.6 million, EBITDA in the German market was EUR 7.3 million is 49.5% of the revenue. EBIT is -- was EUR 4.4 million. EBIT margin was EUR 29.7 million. These figures, of course, increased all the consolidated balance sheet of weight and profit, EUR 2.9 million. Okay. Slide # Page 6 revenue growth very, very fast. We are -- of course, we are we are happy. We have reported 11% of organic growth and this thanks to new logo and in general, upselling from selling on the customer of the acquiring company in Italy and Germany. Cross-selling remains strongly and I remember I just repeat, myLoc contribution is roughly EUR 14.6 million of revenue. Mivitec is very, very low because the consolidation is starting in August. 7, I'd like to give you some breakdown about the single company. You can see in this chart how is happening in a single company with itself margin growth has grown from 42.9% to 45.1%, the first 9 months. But important the improved margin of Matika. Matika is a company we acquired 2 years ago, when we acquired a company, its margin was 18%. The first year in 2020, the margin grown to 27%, in the first 9 months have grown from 27% to 32%. Thanks to push to the customer base of Matika, a high value service of it. Etaeria margin grow from 19.5% to 24.8%. This case, the result is the consequence of the centralization of the data center business. Remember, in first July, we close [indiscernible] closed the migration of the ex-data center to the Wiit facilities. In these figures, we can see the improvement of margin because the cost of the data center Wiit is lower that on the market. Adelante margins growing up to 21% to 22%. And myLoc margin, the business [indiscernible] business went up from 43% to 49.6%. In general, the 9-month adjusted EBITDA is related for EUR 700 [indiscernible] cost regarding integration and purchase price of acquisition. The difference is that we pay more 700 [indiscernible] more cash in the Matika acquisition remaining 20% and EUR 4,000 cost-related [indiscernible] costs related to stock option plan to stock grant approved by the shareholder assembly in May and EUR 3,000 related to M&A transition cost permanently to -- mainly to maybe take a deal in August. Okay. Then the EBIT growing up, we can go to net debt. The breakdown of the net debt was EUR 76 million is the gross net debt mainly -- the mainly change is the EBIT increase when we closed with success in June for approximately EUR 25 million strong operating cash flow generation from operations. The IFRS impact is EUR 8.8 million, similar of [indiscernible]. We don't have material changes. CapEx is totally respect in our budget is EUR 7.2 million, but you have to consider the total CapEx includes the leasing loan, it's EUR 13 million. In EUR 76 million, we include all the debt of the leasing and the brand. So the total CapEx was EUR 13 million. And we have an impact, which is the cash, of course, for the buyback or we buy our share for EUR 6.4 million in this period, goodwill period and we paid dividend for EUR 3.2 million. Mivitec acquisition impact is EUR 2.7 million, is the first part of the deal. We are adjusting price next year related to the, if the Mivitec results will be confirmed by the end of the year. The treasury share is not included and at the market price at the end of September was roughly EUR 39 million. We used part of them in October because in October we closed a very, very important deal Germany, the acquisition of Boreus and Gecko business. And in these figures, of course, it's not including the consolidation of the new acquisition starting in early November. Okay. I think many information, this is all we are absolutely ready to start for the Q&A sessions.

Excuse me, this is the Chorus Call conference operator. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Domenico Ghilotti from Equita.

I have a few questions. The first is related to the organic growth that is continuing is above your, say, medium- to long-term trend that is more, I think, around 7%, 8%. So do you think that is sustainable? And can you give us some granularity on what is driving the organic performance in this quarter? Second is on the CapEx plan, if you can give us an update on the expected completion of the upgrade in Germany. And third is on the German expansion. So you had some hiring plans of, say, your resources for Germany. So if you can give us an update also on that respect.

Okay, thanks. I think about organic growth, we can estimate the continued growth in the range 100 single digit in the range from 7% to 9%. This is at the moment, our view in general. Most CapEx, we are building a unit percent in Germany. We are a little late inside construction. At the moment, the finished, the completed on the data center is the forecasted to June next year. [indiscernible] I think we split a little CapEx half in this fiscal year and the half in the next, we completed the data center in June next year. In terms of German governance management, we hired a new CFO we [indiscernible] new company with there will be in the future our mid [indiscernible] when we include all the local management team and in this [ midcore ] with we hired a new CFO since 2 months in a company, and we want to accentuate a lot of process in Germany like HR process, sales, marketing and sure finance. At the moment, we started for, of course, with [indiscernible] to have full [indiscernible] accountable and starting for the finance. At the moment, we are searching with hiring HR, HR Manager and Marketing Manager. For the moment, of course, we closed the import acquisition in the North side of Germany, [indiscernible]. We are bit if the margin theme of the acquired company as well to join in it or we need to have additional margin at the moment, emulation is in course.

And when you're referring to -- just to be clear on the organic performance, so I was referring more short term. So I understand that you say, medium-term strategy remain the same, but you have been running above, say, this level in the first 9 months any reason for, say, being a bit more prudent going into the next quarter?

I think it's a stable 11% for this year but immediate term, I think 7% to 9% is a good range to forecast. For the full year is, of course, the visibility we have for the last quarter is high. Consider that this year, we closed the half of the booking in guide of the new logo. A new logo is very important because we have a more possibility to upsell in the next 2 years in the in capitalizing the [ Checco ] or other customer we signed in the last quarter. In general, for the 2021, we consider -- to maintain the same growth -- organic growth. But in the midterm, our assumption is to stay in the range of 7% to 9%.

Next question comes from Giorgio Tavolini from Intermonte.

I have a set of questions on profitability on 2022. The consensus is expecting, I guess, on a pro forma basis, roughly, let's say, a stable profitability in the range of 36.6% in 2022. So I was wondering if it's the case if you are active with this assumption. And the second one is on Mivitec profitability. If you could provide the reference on 2020 in terms of profitability for this asset? The third one is on the top line mix. I guess, I was wondering if -- looking at the next 2, 3 years, you expect a higher portion of revenues from Germany rested to Italy or the opposite? And the fourth one on the patent box, if you have any update on the new regime and you want to adhere to this program? So the first one on the margin in 2022, the second -- maybe the profitability, top line mix in patent box.

Okay. Particularly, I don't know how is the consensus in terms of profitability? Do you have the average.

In the [indiscernible]

Okay. In general, consider that in the last quarter, we have usual something more cost compared with the first quarter because we have 2 elements in the first quarter. We have people is not in vacations because in the summer period, of course, we have a lower cost of the people. And we are counting the full bottoms of management and the sales, if the target will be achieved. But in general, I think, we can close to higher than 30% of the margin. Francesco you can check -- okay. The second -- I answered the second question about the Mivitec margin, starting is the 20 [indiscernible] the rig down. Maybe the margin is 28% to [indiscernible] down. On second, I opened a specific, bring it down, 28% [indiscernible] take margin is a 27%, 28%? The EBITDA margin...

It's for 9 months. I was wondering which was the reference for 2020 for last year. Okay lower. Okay. And what the top line mix, okay?

Sorry, just to complete your question, it was lower. And in any case, the figures we just communicated is well before the synergies we are in course or achieved. So maybe we have some -- we will have some improvements in the next few months. Just to complete.

Giorgio [indiscernible] consider that if you look at the consensus and the last research that came out in 1 month ago, we are around, let's say, 37.9% in terms of adjusted EBITDA margin for 2021 that is going up to 38.8% in 2022, in terms of consensus.

Okay. Okay. Now I was wondering if it was -- what was the reference, I mean, in terms of pro forma figures, but that's okay. Okay. yes, because I was wondering that the consensus has a EUR 40 million EBITDA and roughly 110 million of revenues in 2022. So should be 36.6%, the margin.

Yes, because we include the new acquisition, because it is.

Yes, yes.

In terms of top line mix, consider that if we are speaking about 2022 include the acquisition, consider that myLoc organic growth is roughly 10%, 88% earlier a year. But the new company we acquired is not a growing company. It's extremely flat in the [indiscernible]. Etaeria, we grow from 7% to 9%, the same in myLoc business is roughly EUR 20 million in growth, [ 7% ]. The new acquisition at the moment is stable. It's not to grow through margin.

So it's fair to assume a similar breakdown 50-50 or something like that.

Yes. Yes. Yes. The last question about patent box. We are waiting for the final response of Stefano and at the moment, we will speak about our terms adviser. But yes, they advised us to continue the process with the old patent box because all the patent box permitted to obtain advantage in the last 2 years. The new patent box will be adopted sure for the next fiscal year. But we want to complete the process to obtain the message for the year 2020 and then '21.

Next question comes from Michele Baldelli from Exane BNP Paribas.

Just a question on Q3, just remind me on last year. Do you consolidate any revenues from myLoc because actually, I was looking to the year-on-year growth. And if I'm not wrong, there is EUR 5 million additionally from myLoc and then the 0.7 million from Mivitec. It's something that you share with my calculation or not?

Okay. Sorry, 1 second, we have to check the figures of the last year of a myLoc [indiscernible]

Do you have a question in the meantime while we are looking?

Yes. Just quickly on the CapEx front, if you can share with us an absolute level of investments in CapEx that we can pencil in for 2021 and 2022?

We don't have update the budget because we had to consider to have the new acquisition, okay? And net of the impact of the new division, we confirm that we stay until EUR 60 million of total CapEx for 2021 and we had the same level of CapEx for next year. But we have now to consider to update our budget, of course, with the acquisition. Gecko, data center and -- sorry, Boreus data center and Mivitec. Mivitec we don't -- we have CapEx to switch off. Part of the center is CapEx to obtain synergy, and we have CapEx to increase the level of the Boreus. Like-for-like, we forecasted to stay inside our budget, 60 million capital this year, and the same of next year included, of course, the [indiscernible] in these new numbers, of course, we don't include the additional CapEx tools, switch-off in synergy, in Mivitec and improve the security in the Boreus data center. The figures are now I am seeing, the myLoc revenue in the last year was EUR 6.3 million from [ EUR 12.3 million ] revenue, EUR 12.8 million compared with EUR 14 million and [ EUR 600 million ] this year. EBITDA was EUR 6,400,000 and this year is at EUR 7,261,000 is like-for-like, the bring down of myLoc. EBIT margin last year was EUR 3 million and EUR 367 million. And this is year the EBIT was EUR 4.184 million.