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 Full Year 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Cozzi, Chief Executive Officer of WIIT. Please go ahead, sir.

Good afternoon, and thanks, everybody, to join in the conference. You can follow the presentation I sent. The Board of Directors have approved the results for full year 2022. I start with the highlights. And after this results presentation, we have a space for Q&A session. Highlights of 2022, we are very happy for the results on the group level. Revenue, result, very fast, 54% compared with the last year, thanks to contract extensions and particularly the acquisition of the new logo, new customer. In Germany and Italy, most, the company growth double digit. The consolidated revenue was EUR 118 million revenue compared with EUR 77 million of 2021. The consolidated adjusted EBITDA was EUR 42.2 million compared with EUR 29.5 million, plus 43%. Thanks to the concentration in Cloud services, the optimization of the data center, particularly in Germany because we just obtained part of the cost synergy during the 2022 related to the Mivitec acquisition, and we started to obtain the cost synergy in Italy related to the acquisition of ERPTech. The EBIT margin was EUR 23.2 million compared with EUR 15.5 million, plus 50%, and the margin EBIT on revenue was 19.5%. It is the increase of amortization related to the CapEx we did last year in Germany for the new data center in Dusseldorf and the second one in Italy. And the margin revenue was 19.5%, a little lower than last year. But in the last quarter, we have achieved 23.4%. These are the results of the fourth quarter and explain -- show very well the strategy to put more value in higher value-added services in the customer base. And we started to reduce all the revenue of hardware and software sales and consultancy company that is not in our core business and not in our strategy. Adjusted net profit EUR 12.5 million compared with EUR 9.3 million of 2021. And the net financial position was EUR 183 million, exactly in line with how our expectation. In this net debt, we have EUR 2.8 million from acquisition of ERPTech, EUR 18.1 million from acquisition of Lansol in Germany. New investment CapEx, total year, EUR 28.2 million, payment of dividend EUR 8.4 million and treasury share buyback from EUR 7.6 million. In this value, we did not include the value of the treasury share. The value of this share if you consider the -- by the end of December 2022 was EUR 28 million. During 2022, the cost energy was EUR 8.8 million, it's the double of the value of 2021. The large part of this value is referred to the German market, where we have over 14% running. Finance charges in 2022 principally concerned the interest of the bond loan for EUR 4 million. We can jump directly to the slide page number, sorry, 3, the breakdown of the revenue. 51.2% of the revenue is based in Germany and 48.8% in Italy. You have to consider in these figures, we consolidate only 4 months of Lansol group in Germany. And there is note in these figures naturally, all the global assets, the provider, we bought in January 2023. So the forecast will be to more revenue in Germany for 2023 than in 2022. EBITDA margin is a little higher in Italy, EUR 21.7 million, 51% of group level and EUR 20.5 million in Germany. The EBITDA margin in Italy is 37.5%. In Germany, it's 33.6%. The reason why, in Germany, we have a little decrease in the margin is the cost of the energy -- decrease in the cost of energy. Slide page #4, 77% of the WIIT revenue is recurring. At group level, we have exactly the same amount. So the percent one-off is related to the residual part we have in Italy of other software sales and consultancy business. All this value -- all this business are decreasing fastly. Just in the last quarter, we reduced -- strongly reduced this value in terms of revenue nonrecurring. Page #5. You can see the breakdown of the revenue. Organic growth in Italy, we increased organically like-for-like, 4%, but we changed a lot the mix of the revenue. For this reason, the core business, cloud, increased 13%. And what -- I just anticipate the reducing of the non-core revenue related to consultancy and harder and software sales. The total revenue, Italy, organic growth, 4%. In Germany, the growth organically, like-for-like, 11%, very, very good result and MyLoc with Mivitec merged 13%. The contribution of the companies acquired in '21 and '22 was EUR 31.8 million related to Gecko and Boreus and EUR 2.5 million for maybe 4 months of Lansol and in Italy, EUR 5.9 million we have 9 months of ERPTech. EBITDA growth, very well, 42%. We closed the fiscal year 2022 with our account in terms of new bookings, in terms of sales. We closed -- we have very, very good position. Part of the deal, we discussed the market like Tinexta Group or the Gecko, but we have a lot of other deals, small or medium-sized in this quarter. In general speaking, 2022 was very, very good year for the -- in terms of sales, the organic growth. And for this, we have a good impact in terms of EBITDA. The last quarter was particularly higher because we have -- we have the contribution for the onboarding of a new client. If we consider that when we close the contract, we start to build the monthly fee in 2023, but we have a positive impact for the onboard in the last quarter because the customer pay in advance a small contribution for the activation of the services. The personnel costs -- the cost increase for the marketing and communication costs, we increased the marketing to increase the [indiscernible] of the company and that's really for the M&A effect. The personnel costs increased to EUR 29.7 million, mainly for M&A. And what I just anticipate, the cost of the electricity related issue was EUR 8.8 million compared with EUR 4.5 million. We have just the agreement with a local carrier to reduce the cost of energy for EUR 1 million by 1st January 2024. In 2023, we have a fixed price, and we -- our expectation is that we have the same value of the 2022 in terms of the absolute of the cost for energy. If we go direct to the EBIT adjusted, EBIT adjusted increased 50% to EUR 23.2 million. The adjustment refers to the purchase allocation of the acquisition for EUR 4.6 million and not all the cost related to the stock option plan and stock grant. We have 2 main items in the adjustment, the cost of transactions, legal [ subdivision ] fees and the stock-option plans because it's not cashable, it is only accountable, but it's not cash. Net profit increased 34% adjusted to EUR 12.5 million. Net debt is EUR 183 million. If you go and see the net debt including the treasury share, net debt is EUR 150 million. In 2022, we have a shout for M&A, EUR 2.8 million for ERPTech and EUR 18 million for Lansol. Strong operating cash flow over EUR 30 million. Treasury shares buyback for over EUR 7.6 million. Payment of earn-out and minorities for EUR 5.6 million. Treasury share value is approximately EUR 28 million at this value of -- by the end of December '22 and release of investment activities for EUR 28 million to support acquisition without increasing debt. The IFRS effect is EUR 10.3 million, in line with the last year. The cost of the debt is mainly related to the bond for EUR 150 million. We paid an interest rate of 2.375%. Okay. That's all. We are ready for a Q&A session. Not only we'll meet with Enrico Rampin, our Sales Director and Stefano Pasotto, our CFO, to support all the questions.

Thank you. This is the Chorus Call conference operator. [Operator Instructions] The first question is from Giorgio Tavolini, Intermonte.

I was wondering if based on the current visibility you have today, mid of March, you can elaborate more on the first quarter end, in particular, on the demand, organic growth, whatever? And the second question is on the multi-year backlog. I was wondering if it includes the InfoCert contract [indiscernible] contract that you acquired last year? And if you can elaborate more on the InfoCert contract related to the data center movement from Castelfranco to Padova and other -- I mean, the major points related to that contract that was very meaningful for you, if I remember correctly. Thank you.

Okay. So Giorgio, the visibility we have for the first quarter is very, very high because, for example, InfoCert is part of -- the contract with InfoCert started exactly the 1st January 2023. And we have additional 2 new customer signed in the last quarter. We forecast to start to provide services in the middle of the first quarter. At the moment, the visibility we have in the first quarter is good. In terms of pipeline, organic growth, we have a very, very good pipeline in the moment. Whenever -- we closed a lot during the last year. At the moment, the sales pipeline is higher -- good level -- very good level. About the backlog, EUR 140 million is the backlog, total year. Not only we include the InfoCert contract, Gecko and the others. Consider that the moving of InfoCert to the our new data center [indiscernible] 1st January 2025. We have 2 years running with old data center of InfoCert. We enter inside the live contract of InfoCert, okay. We manage all the existing infrastructure of InfoCert. During this transition period, there are a lot of challenges naturally because InfoCert is a company growing faster like WIIT. And just at the moment, we have additional services to add at our basic contract.

Yes. And also, the InfoCert awarded -- the project is a long time, of course, but also is a product that is currently missing part of the new opportunities coming from the growth of the company on one side and also was not -- we were not able during the last quarter to define specifically some transition part. That means that InfoCert is assumed to grow for both for its own growth but also because we are currently missing part of new services that will be, for sure, part of the new pipeline and of the new landscape. It's a very complex and long-term relationship with them.

The next question is from Domenico Ghilotti with Equita.

The first question is on the CapEx level that you expect for 2023. And I wonder if on a cash level, we should expect anyway some, say, payments related to the previous year CapEx because if I'm not wrong on the cash flow, I see just EUR 20 million of payment for CapEx compared to EUR 28 million that you're reporting as CapEx for 2022? And the second question on the tax rate, you ended at around 29%, if I'm not wrong. So I'm wondering why there's been moving up and what should we expect for 2023 and beyond? And then a question on the contract and the backlog. So even if I take out the nonrecurring part, if I just focus on the 77% of recurring CapEx, so around EUR 100 million of sales or slightly lower. So less than EUR 150 million means that this come -- and the backlog is covering 1.5 years. So it's a multiyear contract, but not so long. So I'm trying to understand why we haven't seen, say, an extension and expansion of the backlog level more significant than what reported? And last, you are mentioning that Q4 was supportive also by this setup fees or the start-up of new contracts. Can you give a sense of what was the contribution? So just to understand the more, the recurring part of the EBITDA that we should expect starting from Q1?

Okay. I'll start with the last question to answer. The noncurrent part of the last quarter was approximately EUR 1 million. Our expectation is we have additional [indiscernible] 2023, but also in the first part of the year.

Sorry, sales or EBITDA?

No, it's the revenue. EBITDA is less. EBITDA is half -- particularly half. Okay, revenue -- stable revenue. And about the backlog, you have to consider that the core business, we have a very long contract, but the expiry of the contract is every year despite a lot of contracts. It depends, for example, with -- over EUR 83 million of backlog -- EUR 83 million is a rate only of WIIT, 33 of MyLoc and the other company we acquired in Germany have only 1 year contract that the backlog is less, okay. But the average of the contract in the core business is 4 years. Every quarter, we have an extension or a renewal of the contract because we have many contracts -- many different there to expire. For example, this year, we have already received EUR 7 million of revenue related to contracts expired during -- in the middle of the year, but [indiscernible] EUR 6 million, it means EUR 30 million of backlog because the duration of contract is 5 years. Okay. CapEx, our CapEx respect -- despite the 2022, when we forecasted EUR 32 million, we closed with EUR 28 million. So we have a shift of EUR 4 million CapEx from 2022 to 2023, it is related to the end of the data center in Dusseldorf. At the moment, we forecast to open the data center in mid of June, which is [indiscernible]. For this reason, the CapEx we forecast for the 2023 is EUR 25 million because EUR 4 million is -- EUR 4 million of 2022 shifted to 2023. Okay. Other question is what?

The other question was on the tax rate.

Okay. Tax rate, Stefano Pasotto, we have 2 different situations in Germany.