Good afternoon, this is the Chorus Call Conference operator. Welcome, and thank you for joining the Rai Way nine months 2023 results conference call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Giancarlo Benucci, Chief Corporate Development Officer of Rai Way. Please go ahead, sir.
Thank you, operator, and good afternoon. Let me start thanking you all for joining us today, and welcome to our nine months 2023 results presentation. Today with me, Roberto Cecatto, CEO, who will share the highlights for the period, and Adalberto Pellegrino, CFO, who will take you through the financial performance more in detail. At the end, we will open the line to your questions in the usual Q&A session. Let me therefore hand the call over to Roberto. Please, Roberto, go ahead.
Thanks, Giancarlo, and good afternoon to all of you. The third quarter, and more generally, the second part of 2023, are proving to be intense in terms of activity and satisfying in terms of economic result. Starting with the latter, the quarter consolidated the growth trajectory already recorded in the first half. In particular, looking at the overall performance for the nine months, revenues are up by a factor of 10.7%, mainly benefiting from the link to inflation and the contribution of regional refarming. Excluding, as you will recall, the one-off proceeds from Rai of EUR 2 million in third quarter 2022, growth would be 12%, confirming the ability of our traditional business to deliver net of non-recurring growth in line with or above inflation factors.
Adjusted EBITDA is traditionally very strong in the third quarter, with margin close to 70%, to be precise, 69.9%, driven by revenue growth, and let me underline, a strong cost control despite the inflationary dynamics of the recent times. When compared to nine months of 2022, the 20% growth also benefits from lower energy tariffs, especially when compared to the last year's third quarter. Investment. Regarding investment, the maintenance component is broadly stable at around EUR 780 million, while the development component is, for the time being, down on last year due to the sharp reduction in the refarming portion. In 2023, activities are limited to the completion of inventories, but awaiting an acceleration of the diversification project, which we expect shortly based on the updates I will share in a moment.
Let me emphasize once again, the great capacity to generate cash with the recurring free cash flow to equity after leasing, financial charges, taxes and maintenance CapEx exceeding EUR 90 million. Basically matching in nine months, the level reached in the entire 2022. From an operational perspective, beside confirming the usual good performance of our broadcast networks for RAI, but not only for RAI, also for the third parties, and the good hospitality dynamics shown, particularly by some categories of customers, such FWA and radio operators, I'd like to update you on a few fronts. First, what I consider to be a key milestone for the company's development path, the green light received by our board on the main diversification initiatives, namely data center and content delivery network.
As you know, the company has already done a lot of set up work under the current plan, also including the permitting, the procurement, and some construction activities. But let me say that the vast majority of investment, potentially amounting to a few hundred million EUR, will fall within the time frame on the next industrial plan. Therefore, the full board support was not only appropriate, but necessary. This board decision, while confirming the direction taken, marks the shift from the set-up phase to the major execution of what, along with other initiatives, will represent the expansion process of the next industrial plan. There are several elements appreciated by the board. The supply-demand balance of target markets, expected returns and risk reward, analogies with our current infra business, such as customer reliability and concentration, contract duration, marginality, and so on. Synergy with Rai Way distributed asset and personnel on the territory.
The size of the product, but high modularity of the investment, allowing the expenditure to follow the commercial take-up. In particular, as you can see on slide six , the CapEx spent or committed so far, meaning contracts already signed, amount to around EUR 40 million, mostly devoted to the first set of each data center and partially to the CDN. From here on, with further EUR 10 million-EUR 15 million, which more or less is close to be signed, we expect to complete the start-up phase, slightly increasing the number of measured edge data center and reaching a ready-to-service CDN. All the remaining CapEx related to this project, meaning up to additional EUR 50 million for the densification of both the networks, shall follow demand.
On top of that, the hyperscale data center project, once the authorization has been obtained, the minimum starting investment, let's say, for half of the first module, meaning 4-5 MW, will be around EUR 780 million. I repeat, we face the project with a strong modularity. All the additional investment for capacity expansion, more or less EUR 10 million-EUR 12 million per MW, will follow the order intake. But of course, the permission and the capability is for the full potential of the site. Obviously, the focus of the board, and this is very important, has now switched to efficient rollout and successful commercialization, being aware that these projects have the cash profile of a typical infrastructure. This means investment first, then progressive returns. In terms of recent operating progress, the CDN technology partner has been finally selected and contract awarded.
Therefore, once that the network connection has been completed and the first service installed, we will start with the testing phase. For the edge data center network, the construction of the first five data centers is broadly on track, with progressive completion between end of 2023 and beginning of 2024. The construction of the sixth asset in Rome has been awarded, and equally, if not more importantly, in parallel, we are starting the commercialization, receiving first expression of interest for capacity on a couple of locations. For the hyperscale data center in the Rome area, as you know, the authorization phase is underway, and we are constantly interacting with the municipality to make the process as smooth as possible. Needless to say, all of this project will have a greater visibility in the new long-term industrial plan that we are developing just in these weeks.
Along with these new infrastructures, and of course, the enhancement of traditional business, in the plan, we are addressing how to better capitalize some existing assets, how to extend our positioning in the media supply chain, and how to improve operational efficiency and especially capital structure. The aim is to finalize and present the new plan and the targets in the first part of the next year, most likely with the disclosure of the first year, 2023, or first quarter, 2024 results. Another recent achievement was the finalization of the new EUR 185 million financing. Let me say that the appreciation for our development projects, together with the soundness of the business model and increasing recurring cash generation, enable us to successfully refinance our credit lines.
Compared to the previous one, the new three-year loan provides an incremental availability of funds with a limited cost increase in terms of spread, in particular, if we consider the very different market condition from three years ago. Adalberto Pellegrino, the CFO, will provide more details in a while. But let me say that the major development projects, net of the hyperscale data center, which, due to the sites, will likely require an ad hoc financing, can be considered fully financed through the already available debt and expected cash generation. But let me underline, even preserving distribution to shareholders. Before bringing you through the financial result, I'm glad to anticipate that in light of the performance occurred in the first nine months, and the visibility of the coming weeks, we consider reasonable to slight increase the adjusted EBITDA growth expectation from mid-teens to high teens.
Moving now to the some details of the nine-month financial performance of Rai Way. You could see that the revenues are up 10.7%, or as I told before, more or less 12%, excluding the EUR 2 million one-off amount paid by RAI in the third quarter, 2022, mainly driven by indexation to the inflation, growing contribution of the new regional MUXes business, and the positive hosting activity with the FWA operators and radio broadcaster. Adjusted EBITDA reached EUR 138.4 million, with a margin closer to 68%, up approximately 20% over 2022, as a result of revenue growth and operating leverage, reduction of electric tariffs, reduction in energy consumption, and limited underlying increase in other costs.
Consider that the reduction in energy consumption is a target that we are implementing in each kind of investment in the broadcast area, that give us the opportunity to use new technology to decrease the energy consumption. The below Adjusted EBITDA, after taking account non-recurring costs , the same already occurred in the first half, D&A and financial charges, net income rose at 24.1% to almost EUR 70 million. On CapEx, as mentioned before, the development component is impacted by the substantial completion of refarming for RAI and third parties, which amounts to around EUR 8 million in the nine months 2023, compared to the EUR 30 million expenditures in the 2022. Investment in other initiatives have more than doubled, and now we now expect further acceleration. The net financial position, including IFRS leasing, closed at EUR 134 million.
Cash conversion remains steadily above 90%, with the recurring free cash flow generation exceeding EUR 90 million. With this, let me say, I hand over to Adalberto to provide you with details on the main items of our results and on the new financing that we have obtained. Please, Alberto, go ahead.
Thanks, Roberto, and good afternoon to everyone. So, let's now dive deeper into our profit and loss, starting from top line, slide seven, which reported core revenues coming out at EUR 204 million in the nine months, vis-a-vis EUR 184 million in the same period in 2022. More specifically, as concern RAI, you may see an 8.7% growth compared to the nine month, nine months 2022 figures, driven by the CPI indexation. The growth is slightly lower-...
vis-à-vis the figures we commented in our last call on the first half results, because last year, we had a EUR 2 million one-off penalty related to the termination of the radio AM service that has been effective since the end of the third quarter 2022. On the other hand, acceleration in third-party revenues continued also in the third quarter. We reach in the nine months a growth of 23.3%, pushed by the full contribution of the new regional MUX capacity that has been sold to local broadcaster, as well as to a lesser extent, to the performance very good related to the fixed wireless access operators and our radio broadcaster customers.
Let me recall that in 2022, we had a progressive increase in the contribution of the revenues from the new regional MUX, still negligible at the beginning of the year, while in 2023, the services were fully effective since the beginning of the year, and this explain the good growth we are commenting now. Moving now to cost, slide eight. Total cost in the nine months amounted to EUR 66.1 million, against EUR 69 million recorded in the same period last year. In particular, excluding non-core items, personnel costs increased by 4% against the 7% reported, and on the other hand, other operating costs marks a 14% reduction, benefiting from lower utilities, while other OpEx items recorded a growth on a normalized basis of approximately 4%.
Now, we may focus on the profit and loss. Let's move to the following slide, slide nine. We have bottom line at EUR 69.8 million, recorded an overall 24.1% growth in the nine months, mainly reflecting the just commenting EBITDA dynamic, lower D&A, as we already said in the past, following the termination of the useful life of the old DVB-T equipment. Then we have a higher financial interest due to the rising interest rates, a stable tax rate at around 28.5% in coherence with the previous year. And that's all on this slide. Let's now focus on slide 10 with the net debt bridge.
You can see how net debt, after the increase recorded in the first half, has slightly decreased during the third quarter, coming out at EUR 133.6 million. In the nine months, there is an increase from the EUR 105 million recorded at year end 2022, as a result of, among others, the strong EBITDA contribution, EUR 135 million, about EUR 20 million of CapEx, EUR 25 million net working capital absorption, and EUR 28 million of tax. Last but not least, the dividend payment. Delivering, all in all, a record recurring free cash flow to equity of roughly EUR 91 million, almost reaching the level generated in the entire 2022.
Let's now spend a few words on the new debt we have just closed a few weeks ago. We are at slide 11. Basically, the debt refinancing that we have signed in the past weeks allow for the full repayment of the pre-existing financial debt, whose maturity was the end of October. The transaction will contribute to ensure the financial flexibility needed to support the company's new development CapEx. The total amount, equal to EUR 185 million, is made up of EUR 143 million related to the term loan, of which EUR 101 million draw down at closing, and EUR 42 million of revolving facility to be drawn as needed upon Rai Way request. Lenders are BPER, Cassa Depositi e Prestiti, Mediobanca, and UniCredit.
Both the credit lines have a tenure of three years, and they, their terms include a spread, an interest spread of 110 basis points above Euribor, commitment fee at 35 basis points, a 27.5 basis points upfront fee, in addition to 7.5 basis points coordination one-off fee, and the financial covenant, providing that Rai Way has to maintain a Net Leverage Ratio no greater than 3x the EBITDA.... That's really all on my side, so I now leave the floor back to Roberto for the closing remarks.
Yes, thanks, Adalberto. Guidance. In terms of expectations for the full year, following the results of the first nine months, we have slightly upgrading the guidance for 2023. Based on current level of power futures, the percentage growth of the Adjusted EBITDA is now expected in the high teens area compared to the previous mid-teens. The drivers that you see in the box in the right-hand side of the slide are unchanged, and the upgrade is mostly related to better performance of third-party customers, slightly lower electricity price, but I really underlined also better cost control. That said, let me remind you not to just extrapolate the performance of the first three quarters, as fourth quarter usually the weakest one due to seasonally higher personnel and maintenance costs and higher electricity tariff, considering higher raw energy futures and lack of tax credits.
On the CapEx side, maintenance is confirmed at the last year's level. Development is now expected slightly below the previous indication, as some investments are slipping to the next year, mainly due to the phasing of the working progress reports based on which invoices are issued, and some optimization in terms of asset design and rollout, because we are viewing the project to keep the project more efficient and effective. But as commented before, in terms of already signed contracts and committed spending, activities are well underway and expect to accelerate further, especially after the board decision to support fully this new project. That's all on our side. We can now open the line for the Q&A session, and really, thank you for the attention.
Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. One moment for the first question, please. As a reminder, if you wish to register for a question, please press star and one on your telephone. The first question is from Giorgio Tavolini, Intermonte. Please go ahead.
Hi, good evening, and thanks for taking my questions. I was wondering if you can elaborate more on financial expenses for the next, for this year, I mean, and for the next year, given the recent refinancing. So I was wondering if it's fair to assume something in the region of four, between EUR 4 million and EUR 5 million, so EUR 4.5 million for this year, and if it's something coherent with the higher financial expenses we should have in Q4, given the non-recurring component related to the refinancing and also the ongoing component. The second one is on the consolidation. I don't know if you have discussed during the strategy review the...
I don't know the initiatives, or if you had some contacts with RAI on the possible consolidation with EI Towers. The very last one is on personnel costs. I was wondering if, in Q4, we should expect lower personnel costs after the step up we saw in the first nine months, or, I mean, also to take into account the exits you should add. So, if it's possible to assume a lower personnel cost for next year when compared to this year. Thank you.
... So let me start with the first and the third question, and then, I will leave the floor to Roberto for the second one. In terms of financial expenses, our financial debt, the new financial debt, the overall amount is EUR 185 million. So, as of today, we have drawn down EUR 101 million. So, in order to have an understanding of the potential impact of the interest in the last part of the year, the math is quite simple, assuming the current Euribor, of course, and the spread of 110 basis points. We don't have yet any hedging on the new debt.
As concerns next year, again, starting from the net debt, from the gross debt, sorry, of EUR 101 million, we have as of today, we expect to have, as usual, in the past, an increasing level next year with the peak funding in May, with the payment of the dividend and one month later with the payment of the taxes. So, for sure, we will expect an increase vis-a-vis the overall amount that we will have in the 2023 profit and loss. As concerns your question on the personnel, unfortunately, we cannot...
I don't remember if you were referring to the fourth quarter or the next year, or to both?
Both.
Both. Okay. Let me explain, so, the overall trend for both the figures. In Q4 2023, but let me say, generally speaking, each Q4, if you give a look to the trend of our personnel cost, unfortunately, Q4 is an important quarter in terms of cost. So, typically, the best quarter is the third quarter, because we have the positive impact related to the holidays, but in the fourth quarter, vis-à-vis the third quarter, we expect an increase. Increase in the matter of EUR 1 million, just to be clear, but this is something that you may also see in the trend we had in the previous years.
As concerns next year, we will provide a proper guidance with the next call, when we will comment the full year figures. We expect to have an increase in the overall FTE in relation to the new services. So this is for the time being what I can say, but again, we will have optimization on the core business that could offset this impact.
Concerning the second question, if you remember, in the previous call, I said that I will update you if there are any significant events. You know my personal position on the matter. Let me say that things are not standing still, but there are no substantial news to share today. But let me add a comment. I would like to make one point though. The consolidation story and the related industrial and financial benefits should be seen as a great opportunity for additional value creation to be seen on top of the absolutely positive current, as evident from our numbers, and prospective performance, as we will elaborate in the plan. But let me say today, however, even looking at the stock performance, totally unrelated to these results, it seems that the consolidation has become a drag, a negative element.
I hope things to return to the right perspective.
Okay. Very, very clear. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Mr. Benucci, there are no more questions registered at this time. I turn the conference back to you for the closing remarks.
Okay. Apparently, the presentation has been quite clear and comprehensive, so thanks, to all of you, and of course, we are available for any follow-up, also offline. Thank you, and bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.