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

Good afternoon. This is a Chorus Call conference operator. Welcome, and thank you for joining the WIIT S.p.A. 9 Months 2025 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Alessandro Cozzi, CEO of WIIT. Please go ahead, sir.

Good afternoon, everybody, and thanks for joining the call. This morning, the Board of Directors of WIIT approved the results for the first 9 months. We have a presentation to send. With me, there is Stefano Pasotto, our CFO. After the presentation, there is a possibility to make questions in the Q&A session. I will start with the highlights of the presentation, the Page #3. The company reported revenue plus 9% compared with last year, EUR 125 million revenue. But the most important is recurring revenue growth 11.6%, EUR 102 million compared to EUR 91.7 million in the previous year. EBITDA in consequence grew more faster, 19.5% to EUR 50.9 million compared EUR 42.6 million in the first 9 months of 2024. EBITDA margin adjusted was 40.5%, but the like-for-like margin without the contribution of the acquisition -- of acquiring company was 43.2%. EBIT adjusted growth 17.1%, EUR 26.4 million compared to EUR 22.5 million in the first 9, 2024. EBIT margin was 21%, very, very good. Like-for-like, 21.8%. Net profit in consequence, growth 15.9%, EUR 14.1 million compared to EUR 12.2 million. Net debt, we closed with EUR 163.9 million adjusted. In our adjustment, we're excluding the IFRS 16 impact of lease and including the market value of the treasury share at the end of September. Last year, we closed with the same value, EUR 163 million. We can jump to the Slide #4. We have the breakdown of the results. Naturally, Germany remained the main market for the WIIT Group. Italy is performing well. It's 34% of group revenue. Germany continued to stay over the half of the group level, 53% and Switzerland is stable, 12%. If you assume the -- if you analyze EBITDA margin, we are very happy for Italian results. We continue to perform well, 54% and 55% of the group EBITDA level. German remains solid, 37.7% of EBITDA margin. And Switzerland, I need to consider that -- if you remember that the acquisition of Switzerland was a turnaround situation that we are happy for the results because after 1 year, we just achieved a positive EBITDA margin and most important, positive EBIT margin for the Switzerland company. EBIT level, Italy performed very, very well, 22%; German, 24%. In these figures, we had to consider the positive effect of the not pay off -- no payment of the earnout accounted in the Q2. And Switzerland arrived to achieve a turnaround of EBIT margin 3%. We can go -- directly go to the Page 5. Revenue, particularly important to consider to analyze the recurring revenue is EUR 102 million. It's plus 11% compared to last year. Organic growth 4.9%, but was 10% excluding a churn. Italy was EUR 40 million recurring and is 91% of the total revenue compared 83% last year. Organic growth was 7.5%, 12.8% excluding the churn. Germany, EUR 51.6 million, 94% of the total revenue ex Gecko, naturally registering a growth of 9.1% and the organic growth 2.7% compared to last year, 9% excluding a churn. In the German figures, we just had the first impact of this extraordinary churn that we said during the conference of the Q2. And for this year is very, very good result because in terms of sales in Germany, we record highest value of booking compared to last year. Consider that the gross book in Germany at the end of the September is 30% higher than the whole year 2024. The Germany is very accelerating in terms of gross sales. Switzerland is stable, 64% of the total revenue, we don't have growth in terms of revenue. We can go directly to analyze the profitability, with the chart, Page #6, EBITDA, EUR 50.9 million with a margin of 40%, 43% like-for-like compared 37%, 9 months and 36% before. So very, very acceleration in terms of profitability. It’s driven, thanks for the synergy. We obtained synergy in terms of cost in Germany and Italy, and increasing high-value services sold in Germany and continue performance well in premium services in Italy. The breakdown of this EBITDA is from what is impressive because Italy performed at 54% compared to 46% increasing 800 bps compared to last year. Germany, the same, 37% EBITDA margin compared to 35%. But like-for-like, excluding the consulting company was 42.9% compared to 37.3%. That means 560 bps higher than the previous year. Thanks to cost synergy and focusing -- to focus the company on the high-value added services. In Germany, it's another important part that we record a record of gross sales, but it is the quality of the sales. We are turning from more traditional cloud services to high-value services. And this is in terms of the quality of the earnings is the consequence of this change of the sales. Page 7, EBIT grew 17%, EUR 26 million. In this case, we have a very good effect, particularly in Italy, when we growth from 20% to 22.6%, mainly for the increasing of the occupation rate of our data center. I want to remember that in Italy, the occupation rate is roughly 40% for [indiscernible], in Germany, we are roughly 80%. That means the increase in revenue in Italy, we don't need to do CapEx to expansion of data center. In the next 2 years, what we forecast is a strong increase of EBIT margin for the increase of the occupation rate of our assets. In Germany, 24% is just a very high level, and compared to 23% last year. Net profit in consequence, we go up to EUR 14 million and this level we are totally in line with the market expectation for the next -- for the last -- for the end of this year. Net debt, Page 8. The gross debt was EUR 218 million. But in this value, we now consider EUR 39.8 million of market value of treasury share and IFRS 16 impact for lease of the office in data center for EUR 40 million. Operating cash flow was very strong. Cash generated was EUR 31 million. After we have EUR 2 million of purchase of treasury share, CapEx was EUR 25 million. This is what is important. I want to make more color about that. The cash CapEx are going down compared to last year because at end of September was EUR 17 million the cash CapEx, and we forecast to close the whole year below -- in the area of EUR 24 million, EUR 25 million below the value of last year. EUR 8.2 million is related to the rental fees, colocation and vehicles cars. Dividend paid in May, EUR 7.8 million, secured deposits for the new building, new headquarter we opened in April in Milan, EUR 1 million and EUR 1.1 million was a one-time and one-shot for the reorganization of the people mainly in Germany. Okay. That's it. We are ready to do a Q&A session.

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

So the first one is on the impact on financing costs from the recent bond issuance. If you can provide more color on next year financial expenses. The second one is on the German market. If I remember correctly, next year, there should be EUR 4 million to EUR 6 million CapEx for the new data center with AI -- powered with AI. So I was wondering if the depreciation and amortization in the German market are expected to rise on top of that? And the second -- the third question is on the Italian performance. I saw there is a difference between organic growth, excluding the churn and organic growth. So I was wondering if you are experiencing some churn as in Germany, what is behind this churn?

Okay. I start to answer about the first question about the interest we pay for the new bond. Consider that naturally the coupon of the new bond is increased compared to the last one, but we have a positive impact of carry because we know that we don't anticipate in most of the old bond, we have 0.5 point of carry in EUR 150 million of bond for 1 year. That means we expect to close -- we forecast to have next year roughly from EUR 10 million to EUR 11 million of interest. This is naturally low because we closed the end of September with EUR 6.5 million interest. And for the Q4, naturally, we forced to have a little more interest for new bond, but it's not material. And probably close, in any case below EUR 5 million more or less EUR 9 million total expense. Next year, we forecast EUR 11 million and go down to EUR 10 million for 2027. About the second question on AI, in our budget, it is correct. We forecast of roughly EUR 5 million from the AI. But we are waiting to understand indeed how is strong the contribute from the government in Germany because end of December, probably there is formal, the law in Germany. We have a detail about how much is the contribute from the state. In case it is high, is strongly, we want to increase this CapEx. This CapEx and amortizing is just included in our amortizing because the excess is covered with a contribute from the government in case. In matter of churn, the churn is totally in line with the last 3 years, consider that it's very low because it's EUR 2 million in Italy and the same in Germany. Only in Germany, we have one specific big churn coming for M&A because one big bank acquired a bank, our client. And this churn is at the moment fully recovered with the new booking. Fortunately, in Germany, we have had a very, very strong new booking. And other more currently, we cover totally the value of the churn. For this reason, we expect to stay stable for next year in terms of revenue despite this big extraordinary churn. But it is a churn related to M&A. It's not churn for client to leave the company for quality or competition. It's only specific M&A. In Italy, it's very, very low, the churn rate and 50% of the churn coming from the indirect channel when we have a lot of small clients below our partner. And usually, in this channel, the churn rate is a bit higher. But in the core business, we remain very, very, very low level churn.

[Operator Instructions] The next question is from Marco Vitale of Mediobanca.

A very quick follow-up on the successful debt refinancing. We noted that you have increased the amount to be borrowed. If you could comment what is the rationale here? I believe the higher cash proceeds to finance M&A, but if you could spend a few words on this?

Consider the reason naturally is refinance the old bond. The maturity of old bond was October 2026. We go on the market in advance naturally to avoid to be close to the maturity of the bond. So EUR 150 million is naturally to refinance to repay the bond at maturity date. The excess EUR 65 million is -- the basket we have treasury share is roughly EUR 100 million, is fire power we have to finance M&A and investment in term of data center we need in the future, mainly M&A, we are naturally very, very active in Germany, and we are looking for regional provider, and we want to continue the consolidation of the market in that zone. But mainly is to refinance naturally the old bond outstanding.