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 2024 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Cozzi, CEO. Please go ahead, sir.

Good afternoon, everybody, and thanks for joining in this conference call. The Board of Directors this morning approved the results of the first half 2024. You can follow the presentation I sent before. There is a highlight session after the presentation, there is a Q&A session. You can jump to the Page #3, highlights. The revenue growth 13.4%, EUR 72.7 million compared with EUR 64.2 million of H1 2023. EBITDA adjusted grew strongly, 9.6%. EUR 26.7 million compared EUR 24.3 million in H1 2023. EBITDA margin was 36.7%. But you can see the like-for-like margin without the impact of the acquisition of the German branch, Edge & Cloud and the Swiss company, the like-for-like margin was 39.8%. EBIT adjusted grew 3.7%, EUR 13.9 million compared with EUR 13.6 million in H1 2023, and the EBIT margin was 19.1%. Like-for-like margin grew more faster, 21.4%, better than the previous year. Net profit adjusted was EUR 7.3 million compared EUR 6.7 million and the grew was 10%. Net debt adjusted, excluding IFRS 16 impact was EUR 163.9 million compared with EUR 155.2 million (sic) [ EUR 154.2 million ] end on December 2023. Can jump to the breakdown of the figures on the Slide #4. Italy was -- contribution of Italy was EUR 29.8 million in terms of revenue, and EBITDA was EUR 13.6 million, and EBITDA margin in Italy was 45.5%. EBITDA margin in Italy was EUR 6 million, and the EBITDA margin was 20.5%. Germany contribution was higher, EUR 39.5 million and the EBITDA margin was EUR 13.2 million. EBITDA margin was 33.4%. EBIT was EUR 8.3 million and the EBITDA margin was 21%. Switzerland, you know that the Switzerland is -- for us is a turnaround situation. In these figures, we consolidate in our perimeter only 2 months in May and June. Revenue contribution was EUR 3.4 million, EBITDA was close to 0, and EBITDA was negative EUR 0.5 million. Revenue adjusted are on Page #5. You can analyze the breakdown of the revenue. The organic growth totally was 5.2%, but it's very important to show that the increasing of core revenues was 7.6%, improving compared H1 2023. In Germany, the total revenue grew 5.2%, and the total core revenue grew 4.4%. A in the other figures, the contribution of the new acquired company was EUR 2.1 million related to Edge & Cloud asset deal and EUR 3.4 million of the Econis Switzerland company consolidated from 1st May 2024. In terms of the quality of the revenue, the Page #6. In Italy, we have 83% of recurring revenue. In Germany, we have 98% of the recurring revenue and Switzerland, 86%. In terms of core business, the core revenue grew 15%, thanks to the acquisition of Germany of Econis -- sorry for Edge & Cloud and in Switzerland of Econis business. The EBITDA adjusted, the Page #7, totally was EUR 26.7 million. EBITDA margin total group was 36.7%, but in the like-for-like EBITDA margin without the impact of the acquisition was 39.8% increase compared to 37.9% in H1 2023. The EBITDA margin in Italy was very, very strongly. We are very happy for that. Italy was 45.5% because we are more focused in the high-value services in Italy. 45% we need to compare with 43% of previous year. In Germany, we have 33%, but the Germany like-for-like without Gecko and without the acquisition of Edge & Cloud was 37.4%, because Gecko is a different user of consulting business and reduce a little bit our margin. And naturally, the Edge & Cloud at the beginning is close -- have a very, very low profitability. EBIT adjusted was EUR 13.9 million. EBIT margin was 19%. But like-for-like, the margin was 21.4% compared 20.9% of the previous year. Net profit was EUR 7.3 million, plus 10%, and net profit reported was plus 70% because we had a positive impact of the badwill of the acquisition of Econis. Net debt gross was EUR 219 million. In this figure, we don't have the value of the treasury share and the IFRS impact. In this gross value, we have consider the total capital of acquisition M&A for EUR 7.8 million. But in this EUR 7.8 million, we included EUR 4 million of possibility of future earnout. At the moment, the visibility we have is a very, very low probability to pay that. The acquisition of Econis for EUR 1.3 million and CapEx disposal for EUR 17.2 million. Consider that in our budget, we have forecast EUR 27 million of total capital full year and the first half of the year, we have just spent a lot of them. Treasury share buyback impacted the net debt for EUR 0.5 million roughly and dividend payment, EUR 7.8 million. Okay. Is it possible to have our Q&A about the figures?

Alexander, are you still there?

Yes.

Okay. Operator, we are ready for the Q&A session.

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

Thanks for taking my 3 questions, please. The first one is on Switzerland. I was wondering if you can comment a little bit on the expectation for the full year because you have the EBITDA breakeven in first half. So I was wondering if it's fair to assume a negative or still breakeven EBITDA figure also for the full year. I don't know if it's correct, the EUR 9 million revenues and, I don't know, slightly negative EBITDA. The second question is still on Switzerland. We saw that you recorded a negative goodwill component. So bargain purchase, a positive one-off EUR 1.8 million in first half. I was wondering if you can elaborate a little bit on this positive one-off. And third question is on the contract renewal in Italy, 4-year, that you announced yesterday for EUR 4.7 million. I don't know if it's -- given this is a renewal. I don't know if you expect, I don't know, additional revenues from upselling on this contract? Or it's basically a replacement of an existing contract with the same terms and conditions?

I start to answer the first question about the Switzerland. We will have forecasted to achieve a breakeven point by the first -- by the last part of this year because we started to do cost-cutting in the second quarter, and we expect to achieve a positive EBITDA by the end of this year. But in the next year, we have a full achieve the cost synergy. That means the next year in our budget, the EUR 2.5 million of positive EBITDA in the 2025. But for the current year, we expect to close the fiscal year with a breakeven point with the positive profitability for the -- starting from the last quarter of 2024. About the badwill, consider that we have difference of the price paid for the company and net equity of Econis. For this reason, we are counting in the Q2 2024, a positive impact of EUR 1.8 million in terms of net income because there is a positive difference between the price paid for the company and the net equity of the [ entire ] company. There is only [indiscernible] in this Q2. For this reason in our adjusted [ use ], we excluded this positive impact, but reporting that is natural insight. The third question about the contract renewal, we have a little upselling, it's roughly 20% of the previous value of the contract. Renewable for an additional 4 years with a little more value in terms of early value of the contract. It's roughly 20% -- is not material, is a 20% more. But the -- we have, in the next 2 months, these other 2 or 3 important contract to renewable, and we are, at the moment, optimistic to obtain the renewable for this client because we have historical relation with this client and the mood we have at the moment is to sign a renewal in the next 2 months. They are not really now, we are in the vacation period and is easy but we think in September, we can sign an additional 2 renewable material.

The next question is from Domenico Ghilotti of Equita.

My first question is on the organic performance. You are delivering something around mid-single-digit organic performance on the core business. The -- the run rate that we should expect also for the second half or the full year? Do you see any acceleration or deceleration on that? And second, just a clarification because I see there is a -- in your core revenues, you are taking out Gecko. So can you remind us what is the contribution in terms of sales? And what is the trend that you are expecting? And also if there is any strategic consideration on that?

Yes. At the moment, currently, we have -- our expectation is to continue this organic growth rate in the range from 8% to 10%. In terms of net booking, we are highest this value. Not all the revenue depends on the schedule of the activation of the contract. Now we have already delayed the third revenue for the migration plan. But in terms of the pipeline, in terms of sales, we are over 10% of revenue. In terms of revenue, we stay a little lower, from 8% to 10%, because we have the third time for the process of activation. About Gecko...

Sorry, just before moving. So because if I look at the first semester, you had a core revenue increase in Germany at 4.4% and Italy, 7.6%. So is more the mid-single digits or it should be a quite a significant acceleration to get to the 8.10%.

Yes, we consider that in the second half, we have the full result of the activation of the first quarter because all the contracts activated in the first half, we don't have the full revenue in the quarter, okay? The contract activation in May, for example, we have only 1 month inside these figures. But in the third quarter, we had the full result of the revenue related of the contract activated in the first half. For this reason...

And it was the same also last year. So you mean that you are booking more than last year, and so this is more relevant in 2024 compared to 2023 because the seasonality is also true for last year. Just to be -- just understanding well.

Yes. Yes. Yes. Right. Consider that in the -- to be more tougher than in terms of revenue, we split the growth of the -- all German business. It is now -- I remember that all the companies in Germany is full [ mass ] in [ gear ]. So currently, we have one single company with a core business in Germany, [ WIIT AG ], and we have the Gecko company, not really inside the perimeter, but it's not consolidated in our legal entity so -- with the business of consultant business. For this reason, we split in this presentation, the growth of the revenue in the core business and again, it is outside of the core. In terms of active figures -- and twelve, I want to check -- double check. Stefano, do you have the figures in the detail of Germany and Gecko?

Yes, of course. Gecko contributed about EUR 8 million in the half.

In 2023?

In '24.