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 2025 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Alessandro Cozzi, CEO of Wiit. Please go ahead, sir.

Thanks. Good afternoon, everybody, and thanks for joining the call. This morning, the Board of Directors of Wiit approves the results of full year 2025. You can follow with the presentation I sent. I will start with the highlights. At the end of the presentation, there is a possibility to make a Q&A. So I can jump start to the Page #3, the financial highlights. Revenue growth to EUR 167 million, plus 5.9% compared to EUR 158 million of the previous year. But the most important figures is the ARR, the recurring part of our revenue was EUR 136 million compared with EUR 126 million of the 2024. 88% of the revenue now is recurring. This is very important to have high visibility in the figures for the current year and for the next following years. EBITDA growth more proportional than the revenue for the scalable of the business was EUR 66.9 million, totally in line with our expectation and our budget compared to EUR 58 million of the 2024, a big jump. Consider that we don't have -- I mean the effect is fully organic and thanks to the synergy obtained in the last year. Margin was 39.8% compared to 36% 2024, like-for-like 40%. We increased over 3% of EBITDA margin in the last year. EBIT, very, very good, EUR 34 million compared to EUR 29 million, plus 17%. EBIT margin was 20% compared to 18%, over 2 points more. But after you can show the Q4 effect because the EBIT is growing very fast in the last part of the year, thanks to the stabilization of the CapEx and the scalability of our [indiscernible]. I can show after in another separate slide. Net profit was EUR 16.5 million, plus 11%. We have this year a strong effect of tax rate because for the last year, we have a little more tax compared to '24 because in '24, we had specific accounting effect of the Patent Box of one company acquired, and for the current -- from the last year, we don't have this specific one account. In a prudent approach, we don't account anything about the Patent Box in Italy. Currently, we are talking with the tax office to discuss the renewal of the Patent Box. But in these figures, we don't consider nothing about tax effects. Net debt was EUR 156 million, deleverage compared to last year and total in line with our expectation. Consider that we have the stronger effect of the treasury share because the company bought a lot of treasury share during the last quarter. And thanks to that, the net debt decreased a lot. In this slide, you can go to the slide on Page #4, the breakdown of the figures. Italy was closed with EUR 58.6 million revenue. ARR was very, very high, 91%, EUR 55 million of revenue was totally recurrent. Big jump in terms of EBITDA to EUR 51.8 million, 54% of the revenue. Big jump compared to last year, thanks to the scalable of the assets and the end of the realization of the operation happened during the full year. The same result is very, very good in terms of EBIT. Italy growth strongly to 23%, EUR 13.8 million. And very, very growing way in the last part of the year. Germany, EUR 89 million revenue, EUR 68 million total recurrent, 93% of the Business Cloud is recurrent. EBITDA stable 36 -- little growth, but not so strongly growth, EUR 32 million in terms of EBITDA and 19.6% in terms of EBIT. EBIT margin was 22%. Swiss. Swiss show complete end of the turnaround. We complete the clean of the low-value revenue because of EUR 20 million and ARR was roughly EUR 13 million, and the EBITDA was positive for EUR 2.5 million, and at the end EBIT positive starting from a negative level in the previous year to EUR 600,000 positive EBIT at the end of the year. Totally group level EUR 136 million ARR, roughly EUR 67 million EBITDA and EUR 34 million of EBIT margin. To update in Page #5, the concentration of the customer base is important for the company, continue monitoring how is the dependence we have of the single client. We confirm that we don't have the dependence of the first client. The top 20 client value is 29% of total revenue and the top 50 is only 43%. But important, the increase of the average of the deal of the win. The top 200 client top account, the average -- yearly average of the contract now is over EUR 0.5 million, is EUR 521,000 average for client. And the top 10 is increasing from EUR 200 million to EUR 3.3 million yearly revenue. That means we are selling more premium services in a more large customer base. That means then more residence of the business and a very, very high barrier at the exit. More bigger is the deal, more low is the risk to the migration when the contract is to maturity. So we are in a encouraging way in terms of sales. High visibility of the business, the slide, Page #6, backlog is increasing from EUR 247 million to EUR 260 million. Naturally depend a lot the single year when you have the renew of the contract. Not all the years are the same in terms of expire of maturity of the contract. That in general is growing. Starting from this quarter, we would like to show, to disclose not only the full year result, but a single quarter effect to understand how is the business going in a single quarter. But totally, what we anticipate Italy growth -- grew organically 7.8%. Germany is more stable because I just anticipate we have part of the effect of the one big churn we had during the summer that effected revenue is partially in 2025 and mainly 2026. It's one client, it's not a churn related to risk station or competition is one M&A, one bank in Germany bought other banks and start to migrate the data center in their own facilities. It's an M&A effect. What [indiscernible] is extraordinary and the churn effect is mainly in 2026. Chart Page 8, EBITDA growth in Italy very, very strongly from EUR 27.7 million to EUR 32 million, EUR 31.8 million. And in Germany, whatever we have -- despite we have partially effect of churn, we grew a lot from EUR 29.2 million to EUR 32.6 million. And if you see Q4, in Q4, Italy is growing EUR 1.2 million more in terms of EBITDA and Germany is stable because the activation of the new contract signed during the year fully compensate the effect of the churn in terms of revenue and cost. EBIT, Page #9. This effect is more important in terms of EBIT margin because we will see later, we have a fantastic effect in terms of CapEx. Cash CapEx are reducing compared to last year. And this effect, we will see naturally in the EBIT margin. In Italy, we grew from EUR 2.6 million quarterly to EUR 4 million and in Germany is a little stable. That means in Italy, the EBIT growth from EUR 11.5 million to EUR 13.8 million in Germany from EUR 18 million to EUR 19.6 million. The effect of this CapEx reduction we see more strongly during the 2026 because we expect to have less amortizing for roughly EUR 1.5 million for the current year 2026. It's partially inside 2025, the main advantage we have -- the main benefit we have inside our balance sheet 2026. CapEx, what I anticipate, Page #10. In this chart, we have the breakdown because a lot of investors ask us how is the breakdown of our CapEx, we decided to give more color about the CapEx. You can see here the cash CapEx coming from EUR 26.7 million to EUR 24 million because the utilization rate of our data center is very, very low. In Italy, we have 51% of occupation rate. In Germany for the premium part, 53%. Other part, IFRS is EUR 7.6 million is the effect of the sign of the lease contract for the space of the offices. The IFRS depends the single year when expiring -- the single contract, we need to renew, and we have the CapEx effect, but it's not cash. The cash CapEx was only EUR 24 million. EUR 13 million are maintenance and EUR 10.7 million was growth CapEx. EUR 13.3 million maintenance CapEx means all the CapEx we did to maintain, update all the customer base, all the active contract. If you don't have organic growth, we spend only EUR 13 million to maintain updated technology. Going down the slide, I go now on Page #11, the bridge on net debt starting from EUR 212 million end of '24, we closed gross with EUR 224.8 million, mainly driven, you can see here by buybacks for roughly EUR 60 million. If you don't consider this buyback, we closed with EUR 208 million net debt. But we decided to buy strongly our share because the price was very, very competitive. And at the end was probably a good decision. And in any case, we can use this treasury share to finance part of M&A. But in general, you can see here, EBITDA, EUR 66 million, cash CapEx EUR 24 million, income and tax EUR 5 million, interest paid EUR 9.8 million includes partially the new bond issued in October '25. Reorganization means the cost to have cost reduction in Italy and Germany during the first and second quarter. The new bond cost -- amortizing cost of issuing new bond, EUR 200 million, M&A and mainly dividend and the buyback. If you deduct the debt IFRS 16 for the rent of the offices for EUR 12 million and the value of the treasury share at the end of December for EUR 56 million, the net debt deducted was EUR 156 million. The leverage was very, very strong. As you can see in the next chart on Page 12. Here, we want to show how was the figures of the company in the last 5 years, naturally includes a lot of cash out for acquisition because we spent EUR 180...

EUR 160 million in Germany.

EUR 160 million in Germany to M&A and roughly EUR 40 million in Italy. Whatever we have EUR 200 million cash out to finance M&A, we deleverage a lot the company from -- if you consider the gross debt from 5.2 to 3.4. If you consider the value of the treasury share from 4.2 to currently 2.6. We consider below 3x a very, very safe figure to stay. We want to maintain our company in this range below 3x, and we are just in line with our target. That's it. I think, the Board of Directors this morning approved an additional issue about partial cancellation of the treasury share. We consider that currently, the company own 12.5% of the share capital. The current market value is roughly EUR 95 million, and we decided to cancel 6% of treasury share. We propose naturally to give the opportunity of our shareholder assembly to cancel 6% treasury share in our next meeting in end of April when we approve these figures. And obviously, we show last year a lot of transaction about sales and leaseback of the data center asset. We have in Germany a full set of data center, 17 data center. And we start evaluation with adviser to analyze the possibility to sell part of our data center, not the premium part, the traditional data center to raise cash to finance M&A. M&A is currently a priority for Wiit, consider that after the decision of Broadcom to cancel a large part of the provider in Europe, we receive a weekly opportunity to analyze -- to do an M&A in Germany, France and Italy too. And what do you think in the next 2, 3 quarters, we will start materially to do M&A. So analyze to sell part of the asset with the sales and lease process to raise money on top of the cash we have on hand from the bond and part of the share to finance an external growth of the group. That's it. We are ready for the Q&A.

[Operator Instructions] First question is from Giorgio Tavolini, Intermonte.

The first one is on the sale leaseback opportunity of your German data center. I was wondering if you have any idea of potential cash in and in terms of, let's say, impact on your leverage -- adjusted leverage, including the lower IFRS in that sense or higher IFRS, sorry. The second question is on your recent admission to the Broadcom Advantage program you were mentioning. We should expect an acceleration of the M&A activity, as you were mentioning, but also, I guess, some commercial traction from 2027 onwards. So I was wondering if you expect an additional growth of the top line from this event. And the third one is on the price increase. I saw OVH that raised the pricing on their offers given the rising cost for electronic equipment. So I was wondering if you are wondering -- if you are planning to replicate a similar price increase?

Okay. I'll start to answer the first question about the transaction data center, depends naturally on the perimeter. We assume that it's roughly 7 megawatt perimeter to data center to the sale leaseback. Depend -- the levels depend if you consider the debt IFRS for the rent or not, naturally, because naturally, we want to have for 10 years, the right to use all the asset sale. That means we put in our debt naturally all the contract of 10 years, the contract of the leasing. But it's sure over EUR 100 million of cash. You consider the transaction in the last year, the multiply was from 18 to 22x EBITDA subject of the carve-out. This is -- for this reason, it's material for Wiit. That means the debt -- if you don't consider the debt, the rest is, of course, go to zero with the carve-out. If you consider naturally the debt of current is different because you have cash on the hand, you have debt to pay in 10 years. But the cash you can use immediately and the debt in the other end, you are paying in 10 years, okay? About the power, consider that we have currently EUR 50 million cash of the excess of the bond we raised in October. We have additional EUR 40 million of treasury share considering canceled half of the treasury share and additional EUR 40 million of finance. So we have currently EUR 140 million current views plus the cash arriving from the carve-out. That means we don't need capital increase to finance M&A. This is the message. EUR 140 million plus the carve-out that means EUR 240 million for power. Okay. Second question about Broadcom M&A. Naturally, Broadcom generate the consolidation in Europe. Naturally, it's not a short-term feedback on the market. But at the end, the other partner with Broadcom have a maturity expire the contract with -- by the end -- by June of 2027. That means by end of this year, need to take a decision which partner they want to join in the next 3 years to guarantee the continuity of the relation of the client because otherwise, they will decide to leave this business, or sell the data center M&A or find a new partnership with one of the residual certified partner.

And it is difficult to migrate it.

It is very difficult to migrate. In terms of organic growth, we have just now an increase in the pipeline for the next year because Broadcom comes not only the provider partner, but the white label program that means a lot of software house, now it's not more enable to sell software product inside the services. They need to find another partner. So we have an increasing pipeline for the big software house. And otherwise, we have opportunity to find a new partner for our indirect channel. Enrico, do you want to add more color about the...

Yes. So...

It is mainly related to indirect channel.

Yes. As already introduced by Giorgio, there is a commercial traction related to this effect. For sure, into the indirect channel, several players are looking not only to the Broadcom topics, is a kind of acceleration on the -- looking for a new strategy. So the part of having the benefit on having a new partner is not belonging only to the Broadcom effect, but also to the fact that, for example, all the cloud-native platform that we deployed over the last 3 years is a potential new acceleration for other players. So we already have seen an incremental pipeline coming from this relevant because we are talking about a relevant amount of core, the technology that accounts for several millions. So we are very happy for that, doesn't mean that we already signed all the contracts. So it's a little bit early to forecast now....

To forecast now. I think end of June, we have more clear July about the 2027 figure because consider that this brought on policy impacted our balance sheet in 2027, not 6 because we have the time of the migration contract. We have more visibility in the middle of the summer to understand how the real impact of 2027.

And of course, this means that under this -- we have the umbrella to operate in all the countries that we are operating currently. That means Switzerland, Italy and Germany and also the new country potentially because M&A is not finished. This is important. The fact in all the countries has been very, very huge. Italy, we -- the result is we remain only 4 Italian provider to operate in Germany, 9...

9.

And in Switzerland, 4 or 5. So quite relevant impact. We will see the effect in the following months, but we had an increasing weekly amount of meetings with C levels of partners and clients as well.

The first question about price increase, Wiit is naturally is most exposed on the technology layer. We not so much, but we naturally update our price list with a new cost of server storage. But for Wiit it is not so material because all the infrastructure part is 25% of the value of our contract. Naturally, we increased the price, but all the providers are increasing price. It is not an issue on the table because for all the providers, we have more cost for memory and more cost of servers and probably we have in the storage in warehouse or more server have a big advantage for the single quarter. But if you see full year effect is not material.

Next question is from Domenico Ghilotti, Equita.

Well, first question is a follow-up on the sale and leaseback. So I want to better understand the rationale why, for example, you are considering Germany, but not Italy? And why are you referring to the less premium part of the data center? And if you can explain if there is any negative from, say, from the managerial point of view of having leased back the asset, and if you have, let's say, the option to regain the control at the end of the leaseback.

The first part question is why not only the data center because we want to maintain internally the full premium data center. In Italy, we have only premium data center and the new one in Germany. The occupation rate I told you before was related to the premium part. The other part are full utilizate data center with all the small part of colocation, the old business we had in the first company acquired in Germany is only to understand EUR 12 million revenue in terms of colocation.

30?

EUR 12 million. In Germany, 70 is -- 20% of the total revenue in Germany. But we don't want to transfer the customer base. We want to maintain all the contract with the client only to transfer the asset and sale and leaseback. We guarantee a lease for 10 years. We want to guarantee for 10 years the fees for leasing and the free cash flow naturally, and we want to maintain the customer base. But for the more traditional business, colocation, infrastructure without managed services because just now, all the premium part has migrated in our premium center. All the premium part, the value part is hosted by our premium center in Germany. We have additional 8 -- we understand 7 megawatt is roughly 7 or 8 data center not with a premium service in site, colocation, more metal business, not exactly in our core now. Energy impact, we don't have an impact because we have fixed rate in Italy for 7 years and Germany for 3 years. We fixed the price for [indiscernible] for 7 years in Italy and for 3 years in Germany. So we don't have impact of fluctuation of the energy price.

I haven't asked yet, but actually it was my next question. So on the energy, we have already answered. And last, you were mentioning the churn affecting more 2026 than 2025. But if I look at Q4, should I assume that Q4 has already, let's say, seen the full effect of the churn in Germany, or it's not yet a run rate, a stable run rate?

We are in the middle of the river. It's partially inside, yes, but the full effect we have in the 2020. It's one client, mainly one client. The value of contract is roughly EUR 5 million. We have EUR 2 million effect economically in '25 and EUR 3 million in '26. Partially in Q4 is done, but there's no full effect. We have a little part. But the good news is the gross booking in Germany was higher than '24, and we have a full compensation in terms of revenue. For this reason, the budget '26, we expect lower single-digit growth in Germany, whatever we have this big churn because the gross booking fully compensate the churn. Naturally, we have...

Single digit is on ARR including the churn?

Yes. We expect to grow high single digit and good churn in Germany. But in Italy, we expect to grow faster because in Italy, we don't have this big churn. But the sales in Germany are accelerating. This is very important. And accelerating in the current way, let me say, we are accelerating in terms of gross sales with more high-value contract compared to last year. Last year, we closed roughly 25% of the booking high value. The target of our sales group in Germany this year is to sign 50% of the gross booking on premium sales. And the MBO and all the budget and the bonus for the current year is related -- is targeting on the premium part.

There are accelerators specifically designed last year first, and that's been the signal and this year is also accelerating.

Next question is from Giovanni Selvetti, Berenberg.

Can you hear me?

Yes, yes, yes.

Okay. Well, I mean, I think part of the question has been answered before. Just to have maybe the confirmation of that. If I look at the end of the first half results, you said that the utilization rate was around 40% in Italy and 70% in Germany. Should I assume that this 70% was like the overall utilization, including all data centers? Or is it just the premium one? How should we think about this?