Good afternoon, everyone. Welcome to SECO Q1 2023 results and business update presentation. Before I hand over to your host today, please be advised there will be an opportunity to ask questions at the end of the presentation. In order to do so, please use the raise hand function on your screen or for those dialing in, it's star nine on your keypad. I now have pleasure handing over to SECO CEO Massimo Mauri. Please go ahead, Massimo.
Thank you. Thank you very much. Hi to all. We are here to discuss together the first quarter result. We posted a solid performance during the first quarter of this year with a stronger revenue growth, all organic, which was in the range of 28%. I think we grew a lot in all the countries where we are acting with a very good contribution from the Clea business that grew more than proportionally of our revenue. A bigger contribution also of the recurring revenue about Clea, which comes above 30% of the total. I think, well, also the profitability increased, and we did an improvement in profitability, both on gross profit margin and EBITDA margin.
The gross profit margin was 47.5% from 47% same quarter of the last year and the last quarter of 2022. The adjusted EBITDA was in the range of EUR 12 million, 22% of the sales, 40% above the Q1. We was at 20% in Q1 2022. During the quarter, we did also a strategic agreement with a new shareholder, which is a 7-Industries. They basically made an injection of EUR 65 million as a, as a capital increase into our company, which is really good because of the leverage of our balance sheet. We are now in a position to look M&A again.
Well, I think we have a good visibility for 2023 and 2024. We are building our business. We are set to post all-time revenue record in Q2 this year, where we expected to have stronger growth as well as we did in the first quarter. We will address business and the situation later on. I now to hand over to Lorenzo Mazzini, our CFO, that will describe the numbers. Thank you very much.
Thank you, Max, good afternoon to everybody. Here in these slides, you can see the key highlights of Q1 2024. Q1 2023, sorry. For what concern net sales, you can see here that we closed the quarter at EUR 54.6 million, with a really strong organic growth respect to the same period of 2022. As you can see here, the growth has been backed by a solid growth in both our business, so in edge computing, but more important, as Max already said, in the software part that grew really more than proportionally respect to the edge computing, as you can see, almost doubled respect to the same quarter of 2022.
In terms of profitability, so high level profitability, gross margin, we recorded an important growth in relative terms of 0.5%. This thanks to two factors mainly. The first factor is the gradual reduction of the shortage situation in terms of components that is causing, little by little, a gradual reduction in the cost of our components. The second factor that is really important for others is for sure the growth of the software business that, as you know, has a higher contribution in terms of gross margin respect to the hardware one. In terms of EBITDA, we closed the quarter at EUR 12 million respect EUR 8.6 million of Q1 2022 with a more than proportional growth respect to sales.
You can see that is 40% respect to 28 in terms of sales. Thanks to operating leverage that is start working pretty well in our P&L. You can see that the impact of OpEx on revenue has been in Q1 at 23% or 29% respect to 32% in Q1 2022. Is one of the most important factor that explain the growth of our EBITDA on relative terms. Other factor is obviously the growth of gross margin in relative terms. Regarding the last line of our P&L, so net income, we recorded also here an important growth, more than proportional respect to sales [and these are besides higher D&A].
And higher financial expenses respect to Q1 2022, and this obviously due to the important increase in interest rates that the market recorded in the last year. Thank you, Max, for moving to these slides. In these slides, we represented to you distribution of our sales by geographic area and by end market. You can see what is really important to highlight in these slides is the growth of all our geographic area with a good diversification, not only on sales in percentage term, but also of the growth. We are growing pretty well in all our geographic areas with no dependency of the growth by a single geographic area. We can say the same things in terms of end market.
All end market recorded a really positive grow rate, with just the exception of fitness that, as you know, it means one customer for us. Thank you, Max, for we can go to the next slide. Adjusted EBITDA, well, in this slide, we present to you a bridge from the adjusted EBITDA of Q1 2022 that was at EUR 8.6 and 20% of relative terms, up to EUR 12 million, 22% in relative terms. Here again, you can see from the bridge that what contribute most is the operating lever, the actual OpEx reduce from 32% of sales to 29% of sales. We will, thanks to our growth, we will leverage again on our OpEx in the future quarters.
Just a comment in terms of the adjustment that we did in this quarter to EBITDA that accounts for EUR 600,000. The biggest part, as usual, is represented for EUR 400,000 by the actuarial value of the three-year stock option plan that, as you know, is the plan that is 2021 up to 2024. We can move to my last slide that is the bridge and the trend of the net financial position. Here, we present to you a bridge from the last quarter on 2022 up to the first quarter of 2023. We closed the year with EUR 119 million in net financial position while we closed the quarter at EUR 124 million, with an increase of EUR 5 million.
As you can see in the bridge, and in particular in the bridge of net working capital represented in the chart on the left of the slides, the explanation of this increase is driven by trade receivable and the growth of trade receivable is obviously explained by the important growth of the business that has been recorded in the quarter. An important point to be highlighted here, as you know, in the beginning of April, the first day of April, we closed the capital increase that was underwritten by 7-Industries by EUR 65 million. The adjusted net debt, including the equity injection by 7-Industries was up around EUR 60 million, so with an important reduction respect the EUR 124 million.
As you can see here, with also an important reduction of leverage ratio from 2.7 up, down to 1.2 in terms of multiple of net debt on EBITDA. Thank you very much and I pass again the speech to Max.
Thank you, Lorenzo. Business-wise, what we are observing so on the market is, there are signals of economy slowdown around the world and a few customers that are asking for delay in shipment. Overall, we are facing a very good growth that is coming from both existing customers and new customers. Especially into the new customers, we are converting very well the opportunities that we are receiving from the market. We are now addressing a big opportunity into the water pump market that is really booming here in terms of request for IoT product and solution. As well as electricity metering and EV charger station and industrial solution. Well, I think that these kind of markets are just in the beginning.
We will see further growth that will come from customers because the digital trend is just started. The AI solution that are coming progressively on the consumer market they are arriving also in some way on the industrial market, will accelerate a lot the introduction of our technologies on the market in the forthcoming years. Well, I think what we are doing beside that we are getting traction on the hardware with a good number of new customers in basically all the region. We are building an ecosystem of partners on Clea, with the aim basically to accelerate our time to market, to create standard reference, and also to expand our offering.
As you know, we did agreements with Axelera AI and Google Cloud. Now we are working really to expand with other partnerships that will come during the course of this year to basically create an ecosystem. Creating an ecosystem is so important for our future, because this such of ecosystem will enable us to accelerate further the introduction of Clea into the market. We also launched the Clea store, the solution to really distribute apps for our customers by themself. We already collected a couple of customers on this technology. They will be basically live with their solution within the end of this year. This new revenue stream will start to generate revenue in 2024.
A lot of customers are anyway evaluating this such of technology because it's really combining what we are doing and completing what we are doing in the direction to enable customers to sell value-added services by themselves. We found a lot of interest from our existing customer base. I think it's important to mention that thanks to the deal that we reached with 7-Industries, we are now in a position to come back to M&A, where, as always, we are find quality M&A deals. Meaning target our target that are profitable with a good business model in place.
We are looking hardware company, basically based in the U.S. with local production, to be able to accelerate their growth path, thanks to the Clea offering and thanks to a lot of synergies that, given our dimension, we can really put in place as we did in Germany, and really taking fruits from our shareholders and our company as well. Well, I think that is where we are and where we are going. Now I would like to leave the time to people to make questions. It's Q&A section can start.
Thank you to the speakers today. We now have an opportunity for questions. As a reminder, if you would like to ask a question, please use the raise hand function on your screen, or for those dialing in, it's star nine on your keypad. Once your name is announced, please unmute your line, state your company name before asking your question. Thank you. We will now wait a few seconds. All right, our first question today comes from Mr. Marco Vitale. Please, the floor to you.
Thank you. Good afternoon to everybody. It's Marco from Mediobanca. I will start with three questions from my side. The first one is on the outlook, if you could provide some additional indication on what you expect over the coming quarters. Also looking at the speed, the strong start of the year and the speed of growth that you are experiencing in the first quarter. The second question is on the profitability. We noted an improvement in gross profit margins and also on the EBITDA on a year-over-year basis. I was wondering how we should look at these trends over the coming quarters if the ongoing easing in the supply chain is providing relief on gross profit margin.
Do you expect further improvement over the rest of the year? The third question is about the Clea. We noted a step up in the rate of recovery revenues from this business. I was wondering if you could provide us a lot more indication on the number of actual device installed, and whether this percentage is expected to further grow into the rest of the year. Thank you.
Okay. Well, I think, starting from the top line growth, as you probably know, we changed our strategy into communication. We don't want to anticipate too much what will be the future. What I can say is the second quarter of the year will be stronger, and we are expecting to reach the record, all-time record in revenue for the company. We are setting for another good quarter. Generally speaking, 2023 will be... and as I said, from already a couple of quarters, in here we've an organic growth stronger, but in our mind it's well above 20% year-on-year. That's the kind of indication that I can give to you on it.
On the margins, yes, we are recovering margin for, basically, both, hardware and the software. On the hardware side, what is happening, we are acquiring better than 2022, the price of the components, excluding the CPU, are decreasing. Thanks to it, we will have a better margin. You will see it progressively, because we have a lot of materials in our inventories, but it's material that we bought in 2022.
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Sorry. I think you will see progressively an increasing of the margin, the gross profit margin that is coming from hardware. That is true, and you will see it over the entire year, I would say. on the Clea business, the fact that the recurring revenue coming from Clea is increasing from 15% over 30% already, and it's producing a better margin as well, because that part have a higher margin. As a consequence, I will expect the gross profit margin playing the good during 2023.
On EBITDA level, we are entering into a space where the size of our revenue are really producing operating leverage, but Lorenzo already described with an incidence on the OpEx, that is decreasing progressively on the revenue, which is good to enable the company to perform an increasing trend in EBITDA as well. Basically, those are the trends that we are observing, and we think we will continue to observe during the course of the year on the profitability side. On the Clea business, we are getting traction with customers. I don't have exactly the number here with me, but we will follow up via Marco Parisi later on exactly the numbers of devices connected right now.
Just to give you a sense, we are progressively convincing customer one by one in adopting Clea. As you know, the life cycle of the introduction of the product is not a quarter, it's more or less four quarters. Due to the fact that we did a lot of job in 2020 end of 2021 and 2022 already, we are continuing now in keeping customers one by one into Clea. Again, we starting now to leverage on the work that we did because a lot of the 2022 customers are entering actually in the production, meaning that they are running connected devices every month.
As well as we would continue, and we are continuing in increasing the numbers of the customers as a total, meaning that we have a clear trend of growth that will continue. In my mind, when we launched Clea in 2021, it was a big bet on a new product, which is now after almost two years from the launch, we can say that we won the bet. This is a product that is taking traction and will be a consistent part of our business in the forthcoming years. We definitely added a piece of value to our offering and a piece of technology very important to our customers.
Okay, thank you.
Thank you very much, Mr. Vitale, for your questions. Our next question came in via chat. It's from Ms. Terrazzi. Good afternoon. Thanks for the presentation. Just to help us better understand your visibility, could you please give us some more color on your backlog and order intake? Many thanks.
The backlog and the order intake are still strong. We got over six new customers during the first quarter, and we are continuing to add the customers also in this second quarters, which is good because it is providing us a very good visibility, not only for 2023, but also for 2024, where when this batch of customers will enter into mass production hardware-wise and software-wise, it will add new revenue stream that will add to the existing revenue. Which is good because it put the company in a position to think the future as a future of growth.
This is one of the most important point in my mind, because we are a growth story, we are a tech story, but the strong part of our story is the growth. We grew a lot in the last five years. The aim and the strategy and what we have in mind is to continue to grow at a superior growth path, meaning beating market and competition with a superior growth path also in the next five years. That's. That's something that we are building piece by piece, but is going extremely well.
Thank you very much, Mr. Mauri. Our next question today comes from Mr. Tytus Żurawski. Please, the floor to you.
Thanks. Hi, Max. It's Tytus from Goldman Sachs. Congratulations on the quarter. Two questions.
Thank you.
Two questions for me, if I may. First one on working capital. You had around EUR 10 million of outflow in the quarter, mainly driven by increase in trade receivables. Could you provide more color on that? Is it just noise between quarters, or do you see customers trying to negotiate longer payment terms given the current macro backdrop? My second question is on Clea revenue. Right now, Clea revenue is dominated by non-recurring project revenue. I think a couple of quarters ago, it was around 85% of Clea revenue, and I believe it will be still the majority for this year.
Going forward, once those projects go live, and Clea upsell will become more meaningful, what do you think is a reasonable expectation for FY 2024 for recurring revenue share of Clea? Do you think it can be, 50% or even above that? Thank you.
Yeah. Let's start from the last question, for sure. In 2024, the recurring revenue about Clea will be above 60% because they are increasing, basically, due to the fact that customers are entering into mass production. The level of project which are the component of non-recurring engineering, is increasing as well, but not so much. In the end of the story, I think the. Or we will be over 50% of the total in recurring revenue already in 2024. About the working capital, and as you said, yes, there are two dynamics. When was basically a quarter related, payment that arrived 5, 6, 7 of April, that basically don't count into the quarters.
There is someone, not so many, but some customers that are asking for better condition into payment due to the high interest rates. We are trying to accommodate it because their relation with the customers, the long-term relation with the customers is so important in our business. If we were a request that are reasonable, we try to accommodate them just for, you know, couple of quarter or within the end of the year. It's the right way, in my mind, to improve the relationship with the customers and to keep the business going. The interest rates is starting to be in too high. That's my opinion, especially in the U.S. They will affect the business sooner or later. Not our business, but business in general.
This is the reason why I hope to see a reverse into the strategy of the central banks by the end of this year, because it will provide a lot of fuel into the business.
Awesome. Thank you for your answer.
Thank you, Mr. Żurawski. We currently have no further questions. We will wait a few seconds to give everyone the opportunity to follow up. Mr. Marco Vitale, the floor to you. Thank you.
Thank you. Sorry for the follow-up. Maybe if you could provide us an update on how is the implementation of the Camozzi partnership ongoing, if you're running ahead of schedule, in line of schedule with the delivery of the expected top line and SaaS business? Thank you.
Yes, we are going in line with the schedule, slightly better. We got a couple of very important customers in the first quarter on the industrial side, thanks to the Camozzi contribution. We will see revenue starting from these customers in the end of 2023, five years contracts on Clea. We will see them for a very long time making business on Clea, thanks to the Camozzi contribution. I would expect to see another big important achievement during this quarter because we are working now to finalize an agreement with a very important customers and Camozzi as well into Clea. We'll see what could happen by the end of this quarter. I think we are in line/a bit better.
Thank you.
Thank you very much, Mr. Vitale, for your follow-up question. We will now wait a few seconds to see if any other participants would like to raise their hands. As we have no further questions, I will now leave the floor to Mr. Massimo Mauri for any final comments. Thank you very much.
No, I would like to thank you very much for today, for your attention. Marco Parisi is always available for further specific questions that you may have. See you soon. Bye-bye.
Thank you very much, everyone. This presentation will now come to a close.