Welcome, and thank you for joining the Rai Way first quarter 2025 results analyst web call. All participants are on listen-only mode, and after the presentation, there will be a Q&A session. At this time, I would like to turn the conference over to Mr. Andrea Moretti, Head of IR of Rai Way. Please go ahead, sir.
Thank you, Maria. Good evening and welcome to everyone. As we presented our yearly results and 2025 guidance less than two months ago, today's presentation will be relatively short and focused on the Q&A. As usual, today's speakers will be Rai Way's CEO, Roberto Cecatto, the CFO, Adalberto Pellegrino, and Giancarlo Benucci, Chief Corporate Development Officer. Let's first start with a financial and operational overview of the quarter. Please, Mr. Cecatto, the floor is yours.
Good evening to everyone from me as well. Starting with the financial result, which will be explained in detail by our CFO, Adalberto Pellegrino, the trends and the drivers observed in the first quarter are fully in line with expectations. In particular, at revenue level, we continue to maintain an inertial CPI plus growth profile. The growth exceeding CPI came from rising tower hosting volumes driven by radio broadcasters, fixed wireless access providers, and public administration. The first marginal contribution also came from diversification. EBITDA remained flat, even considering the solid underlying operating leverage and profitability of the traditional business. This was due to some items: diversification-related costs in line with the expectations and full-year guidance, as well as higher energy tariffs.
Current levels were low, both for maintenance due to the typical seasonality of the first quarter and for development, reflecting the negotiation phase for the EBIT projects and the completion of the first phase of the new project rollouts. In the quarter with no dividend payment, low CapEx, and low maintenance activity, free cash flow generation is typically high and reached EUR 22 million. From an operational standpoint, even though only two months have passed since our last update, I'd like to take a moment to share a few developments interesting. Talking about diversification, after a long period of testing, we have entered into negotiations with some major content providers to use Rai Way's CDN to distribute video traffic across Italy under framework agreements. In one case, the discussion is really at an advantage stage.
Consider that in a market already served by other relevant players and solutions, reaching this stage of discussion with certain parties seems to confirm the distinctive features and value proposition of Rai Way, as we identified from the very beginning. From a traditional business perspective, after the already announced finalization of the contract with Rai, we are starting activities for the significant expansion of the DAB network, which will keep us busy in the coming year. At the same time, as clearly shown by our quarterly result, the usual market trends and the focus on operational efficiency remain confirmed. I am also happy to announce that in mid-April, the relocation of our headquarters to the new offices in Rome was completed. Let me say that this will contribute to strengthening our corporate identity, better communicating our brand, and enhancing the quality and the productivity of our employees.
Last but not least, as it is well known, during the quarter, the industrial analysis regarding a potential merger with EI Towers has been initiated, and activities are currently progressing. The quarterly financial result and operational progress are to confirm the expectations for 2025, which I will reiterate in more detail at the end of the presentation. Before this, our CFO will go through a much-detailed overview of the result. Please, Adalberto, go ahead.
Thank you, Roberto, and good afternoon to everyone. We are now on page five, which provides an overview of the financial results for the first quarter of 2025. I will skip it and go straight to the details of each metric as usual. Let's see together slide six that shows the trend of core revenue, which increased by 1.7% to EUR 70 million. One year after introducing the new business line breakdown aligned with the industrial plan view, starting this quarter, we are continuing the previous customer-based classification in our financial communication. In any case, please consider that the contribution of Rai to Rai Way's total turnover was around 84% in the quarter. Starting with the media distribution segments, revenues increased by 1.6%, reaching EUR 61.9 million. The additional growth beyond the CPI that was equal to 1.2% is mainly due to non-core elements.
Regarding the digital infrastructure segment, revenues amounted to EUR 8.1 million. The segment marked a 2.5% increase, mainly driven by the growing contribution from radio broadcasters, fixed wireless access providers, and public administration, as well as the first results from the commercialization of edge data centers. The recorded increase rose to 3.1% when excluding non-recurring items, typically prior-year adjustments that last year were higher than this year. Let's move to slide seven on OpEx. We see a 4.4% increase in the overall cost of Rai Way landing at EUR 23.2 million. Breaking down the OpEx, personnel costs were up 8.3%, which drops to approximately 4% when excluding capitalization. Such an increase was due to reinforcement in the workforce, perfectly in line with the assumption that we included in our industrial plan.
Other operating costs remained essentially flat, EUR 10.5 million, despite increasing costs related to the launch of the diversification initiative and the higher energy cost, both offset by one-off non-recurring items in any way in a context of constant monitoring of the company's cost base. Slide eight. We recap, as usual, the profit and loss till the net income, and we may see that the dynamics just described translate into an almost flat adjusted EBITDA at EUR 46.9 million. Slightly below, we underline the D&A, which keeps its growth trend quarter by quarter, following the increase in CapEx connected to diversification and to development initiatives on the core business. As concerns the financial charge in Q1 2025, thanks to the central bank cuts, the cost of our debt is lower than the amount recorded in the last year's first quarter.
Including an equally flat tax rate, net income, as we have seen in the previous slide, came in at EUR 22.6 million, down 5.3% quarter-on-quarter, perfectly in line with the trend already envisaged in the industrial plan we have approved in 2024. Let's finally move to slide nine, where our financial performance is represented. You all know that in the first quarter of each year, Rai Way typically generates cash because the dividend outflows take place in the following quarter, in May. Moreover, CapEx activity is typically weak in the first three months of each year. This quarter is perfectly in line with this trend, showing also CapEx amounting to EUR 4 million.
Also considering another typical absorption of working capital for almost EUR 14 million, the net debt at the end of March reached EUR 116 million compared to EUR 128 million at the end of 2024, bringing the leverage ratio to 0.6 times. I'll now hand it back to Roberto for the guidance and final remarks. Please, Roberto.
Thank you, Adalberto. We are now on page ten. As anticipated, the guidance for the full year provided in March remains valid. In the last months, energy prices have proven to be still quite volatile. In the first quarter, we also recorded some additional non-recurring benefits, but overall, nothing measured to change today the positive outlook already shared with you. Therefore, we guide for the usual healthy underlying growth of our traditional business, mostly compensated at Adjusted EBITDA level by two effects: slightly higher expected energy tariff and the higher dilutive impact on EBITDA on the diversification initiatives, in line with the assumption of the industrial plan. In particular, first, in the media distribution segment, the Rai fixed consideration will benefit from CPI link, while other components will be supported by the DAB coverage extension and rising CDN contribution.
In the digital infrastructure segment, we expect a CPI plus growth, with the plus coming from data center rising contribution. On the OpEx side, the increase will be largely related to the diversification initiatives, while on the traditional businesses, the inflation will be modest and mainly due to electricity tariff. On the CapEx side, maintenance CapEx level will be a few million euros above the normalized level of 6%-7% of sales due to some extraordinary and non-recurring activities. The development CapEx are expected broadly in line with last year and mainly devoted to DAB rollout and diversification. Let me say that the guidance is there, and I think that now it's now time to answer your question, and thank you for your attention.
Thank you. We will now begin the question and answer session. To enter the queue for questions, please click on the Q&A icon on the left side of your screen. When announced, please click continue on the pop-up window. If you are connected in audio only, please press star and one on your telephone. The first question is from Giorgio Tavolini of Intermonte. Please go ahead.
Hi, good evening. Thanks for taking my question. The first one is on if you can provide an update on the commercialization of edge data centers. In Q4, you talked about a multi-year revenue backlog of around EUR 6 million. I was wondering if there was any relevant update on this front. The second question is on consolidation. Actually, we got a very encouraging update from EI Towers regarding their harmonization of the perimeter of the activity. They extended their perimeter to the ownership of the active equipment. I was wondering if it was somehow a precondition for considering a potential merger. The second question is that now that the two perimeters of the master service agreements are aligned, I was wondering if you see any remaining differences worth to be fixed, such as, for example, the contract duration.
Now your contract expires in 2028, their contract expires in 2032. There is a space for an harmonization on that side and probably also on the CPI link. I was wondering if you have any thoughts on that front. Thank you.
Rai Way Data Center, [Foreign language] .
Ciao, Giorgio. I'll keep the one on the data centers commercialization. Let's say that our commercial activity keeps on growing in terms of offering, so proposal, and in terms of creating a reseller ecosystem. Basically, we explained the dynamics of the market during the last presentation, and the direction has not changed as of today. We are also looking for some, let's say, solution to accelerate a little bit the decision-making process of smaller customers, like introducing some IaaS services that go slightly beyond colocation. Generally speaking, there are no major changes, and the commercialization is going on.
Considering the question that you addressed regarding the consolidation, let me say that from what we have read, it seems that the model is evolving towards ours as we hone the active equipment used by Rai. This makes the scope of the business even more comparable. Let me say the perimeter that we know is anyway different. To give you an example, we are managing all the radio management of the network, including site and active equipment. This is presumably different between the other part. This is the answer that I could give you. Considering the other point, let me say that we are not in the condition, of course, to answer to your question. Let me say that the analyses are ongoing, and as we already said, the focus is particularly on industrial aspect and synergy.
Very clear. Thank you very much.
The next question is from Milo Silvestre of Equita SIM.
Yes, good afternoon, everybody. Just two questions. The first one concerns hyperscale data centers, so if you can elaborate more on that and if you have received all the authorizations that you are waiting for. The second one is a follow-up on the edge data centers, so if you have, let's say, a target in mind for the full year in terms of revenues.
Thank you for the question. Let me address the hyperscale story. We have some good news because, let me say, in this week, we just received the positive completion of the, in Italy, we call Conferenza di Servizi. That is a milestone in the authorization process. It is another good step, but you know that the bureaucracy in Italy is pervasive, and we would like to wait for the next steps. Maybe easier, but one milestone was the closing and the positive closing of Conferenza di Servizi we just completed the past week. I will address this issue when we will have really the final permission to start to build. On the second point.
As concerns your second question, I would refer to our diversification initiatives of both edge and CDN. In the year of the service launch, 2024, we made hundreds of thousands of EUR. In 2025, we expect to go above EUR 1 million, but in any case, I would not focus on the accounting value of our revenues in 2025. What will be key is to work in order to close contracts with a positive impact on the following year. The overall yearly value of the contract that we will sign, that is clearly key in order to guarantee the growth of our top line consistently with the trend of our industrial plan.
[Foreign language] .
You're welcome. [Foreign language].
As a reminder, if you wish to register for a question, please click on the Q&A icon on the left side of your screen or press star and one on your telephone. For any further questions, please click the Q&A icon on the left side of your screen or star and one on your telephone. The next question is from Andrea Belloli of Banca Akros.
Yeah, thank you for taking my question. Good afternoon, everybody. I'm Andrea from Banca Akros. We just started the coverage yesterday. Just a quick one on OpEx. If I understood well, higher energy tariffs impacted for EUR 1.1 million additional costs in Q1, but I see that other operating costs remain flat year over year. I was wondering if you can give us more color about eventual efficiencies that there has been in other costs. Thank you.
Hi. As concerned the OpEx, yes. Basically, we have an impact on the energy cost of approximately EUR 1 million quarter-on-quarter. That's correct, as well as an increasing trend, of course, of the OpEx related to the diversification initiatives. All these negative impacts on our OpEx have been basically offset by some one-off that we had, prior year adjustment, higher than the value recorded in the first quarter of 2024. This is the most important impact. We also have a few hundred euros of impact coming from our focus on cost cutting and, generally speaking, control on our cost basis. This is the overall impact of all this trend and is basically neutral when you see the other OpEx overall figures.
Okay, clear. Thank you.
The next question is a follow-up from Giorgio Tavolini of Intermonte.
Hi, just a follow-up on the energy prices. I was wondering if you confirm your assumption on the energy prices for 2025. In your Q4 presentation, you were assuming EUR 125 per MW hour. I don't know if it's still the case or you are seeing rising energy prices when excluding the spread and green energy option and so on and so forth. Thank you.
Broadly speaking, we are more or less in line with the amount that you just mentioned.
Okay, thank you.
For any further questions, please click on the Q&A icon on the left side of your screen or star and one on your telephone. Gentlemen, there are no more questions registered at this time.
It's fine. Thank you, Operator, and thank you, all attendees. We look forward to seeing you in our brand new headquarters whenever you travel to Rome, and wish you a pleasant evening. Thank you. Goodbye.
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