Good afternoon. This is the conference operator. Welcome, and thank you for joining the Rai Way first quarter 2026 results 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. Please go ahead, sir.
Thank you, operator. Good evening, and welcome to everyone. As we presented our yearly result, a comprehensive operational update and the 2026 guidance only a few weeks ago, today's presentation will be relatively short and focused on the financial performance of the first three months of the year, leaving time for the final Q&A. As usual, today's speakers will be Rai Way CEO, Roberto Cecatto; our CFO, Adalberto Pellegrino; as well as Giancarlo Benucci, our Chief Corporate Development Officer. Let's first start with an overview of the quarter. Please, Mr. Cecatto, the floor is yours.
Thank you. Good evening to everyone from me as well. Starting with the financial results, which will be explained in detail by our CFO, the trends and the drivers observed in the first quarter are fully in line with expectation. Revenues grew by 2.6% year-on-year, supported by the contribution of both of our segments. Considering a 1% applicable CPI, it's clear that Rai Way continues to outpace the contribution from inflation, thanks to the new business such as DAB and diversified assets. Looking at the adjusted EBITDA, it grew by EUR 0.4 million or 1%. Even excluding the positive impact from energy tariffs, providing for EUR 0.2 million compared to the previous year, the performance was positive despite a negative year-on-year impact from the level of non-core items, which accounted for almost EUR 1 million.
This means that on a pure underlying basis, in the first quarter, the adjusted EBITDA rose by over EUR 1 million, driven by the positive trend of traditional business, and as well as the progressively slower absorption from diversification initiatives. CapEx was relatively low, which is usual in our first quarter. However, we recorded a slight acceleration in development investments currently with the guidance. In particular, we kept on investing on the DAB network extension and the expansion of our CDN. Finally, the free cash flow generation was strong in the quarter and reached EUR 34 million, bringing down the net debt as it typically happens in our first quarter, given the absence of dividend payments, low CapEx, and limited maintenance activity. From an operational standpoint, we continue to make progress across our key development projects.
The DAB, the Radio DAB network from Rai further expanded its coverage during the quarter. We started to deploy the project in the second quarter of last year, and we plan to complete it by the end of 2027. Let me remind you that we plan to invest a total of EUR 30 million. At the same time, we have started the construction work in the already authorized sites involved in the solar power project. In the meantime, we continue to move forward with the authorization process for the remaining four sites of the eight included in the first phase. The commercial activities continue for both the content delivery network and the edge data center that is starting to be reflected in a still small but encouraging improvement in term of quarterly revenues, which amounted to EUR 0.3 million.
In parallel, we have completed the preparatory work for the launch of the hyperscale data centers marketing campaign, and we have scheduled the first meetings with key prospect, key possible client or partner for the coming weeks. To ensure the capital in view of the deployment of all this project, we also signed the extension to April 2028 of our current credit lines, preserving the favorable term and condition. Adalberto, the CFO, will provide some more color on the matter. The quarterly financial result and operational achievements that I have just summarized allow us to confirm the expectation for 2026, which I will reiterate in more detail at the end of the presentation.
Again, in term of outlook, let me also remind that the last 30th of March, RAI, F2i and MFE-MediaForEurope announced the extension to 15th of June 2026 of the Memorandum of Understanding concerning the potential integration between Rai Way and EI Towers. Let me say that after completing the industrial analysis, as already we told you several times, the shareholders are now discussing, on the one hand, the identification of principles of the deal structure and governance that are consistent also with the relevant legislation, the DPCM. On the other hand, a framework of relationship with the operating companies that is industrially sound and sustainable in the long term. That said, I will now leave the floor to our CFO, who will go through a much detailed overview of results. Please, Adalberto, go ahead.
Thank you, Roberto, and good afternoon to everyone. To go fast, I will skip page five, KPI overview, and I jump directly to slide six, which covers the details in the following slides that basically cover all the details of slide five. Slide six, as shown, our first quarter core revenues increased by 2.6%, reaching almost EUR 72 million in the first three months of the year. When excluding non-recurring effects that had a positive impact last year, due to prior year adjustment, media distribution services were up by 2.4%. This reflects the extension of Rai's DAB network coverage, which is included in the new services for Rai, up by approximately EUR 1 million, reaching EUR 2.8 million.
On the other hand, we have the well-known 1% increase in Rai fixed consideration coming from CPI indexation. As part, as concerned the digital infra segment, revenues reach EUR 8.8 million, up 5.3% compared to last year on underlying basis. Such growth was supported by tower hosting, which increased by approximately 2.4%, confirming an head of inflation performance together with the growing contribution from connectivity services and data center. All together, which means data center and CDN diversification initiatives provided an increasingly meaningful contribution, although still limited in absolute terms. EUR 0.3 million compared to EUR 0.1 million last year in the first three months. Moving now to OpEx, slide seven, we had a 6.3% increase of total cost, which landed at EUR 24.7 million.
Breaking them down, we noticed that personnel costs were up 3.7%, mainly because of the economic impact of the renewal of the collective labor agreement. Diversification initiative that requires specific competence contributed by only EUR 0.1 million to the overall increase in our labor cost. Other operating cost were up by 9.6%, here there are many trends to be commented in order to have a proper understanding of the run rate level and the run rate trend. From one side, we had the benefit of EUR 0.2 million from energy price change.
This probably could seem strange, but we have to remember that in the first quarter of 2025, unit cost for electricity had in fact risen significantly following the interruption of gas flows that Russia was transporting to Europe via Ukraine. The increasing cost during the first three months of 2026, on the other side, remains limited because the conflict in Iran began in the last days of February, with a limited impact in the quarter. Excluding the commented benefit on the energy cost and excluding also the negative impact from the level of non-core items, prior year adjustment, underlying external cost increased by only 2.4%, meaning EUR 0.3 million, almost half of which depending from the diversification initiatives.
That saw as a negligible impact on the overall trend. Slide eight. Here we have a clear visual summary of what we have discussed so far. As you can see, the traditional business remains healthy and continue to grow, confirming the resilience of our core activities. The standalone increase in adjusted EBITDA is EUR 1.1 million out of a EUR 1.7 million increase in revenues that you see on the left. At the same time, diversification didn't have any impact on the EBITDA in this quarter. Let me clarify. Diversification activities EBITDA, of course, is still negative in absolute terms, but reach basically the same level that we had in the first quarter last year. This is thanks to the increasing revenues and the cost control.
The slide also highlights the impact of non-core items amounting to EUR -0.9 million, almost EUR 1 million of negative impact. This, as I mentioned, is mainly referred to different values quarter-on-quarter in relation to the amount of the prior year adjustment. Finally, as anticipated, the effect from energy tariffs that was positive in the quarter and equal to EUR 0.2 million. It is probably going to worsen going ahead due to the geopolitical scenario that is giving an increase in the energy tariffs. On the next page, slide nine, we recap the whole profit and loss, where we notice that the dynamics just described translate into an adjusted EBITDA up by 1%, EUR 47.3 million.
We have a EUR 0.6 million adjustment that is related to the impact of the lease agreement, mainly for our regional offices, which is temporarily accounted for as OpEx because the renewal is pending. Once a new lease agreement is signed, they will be, of course, accounted as D&A and financial charge according to IFRS principle. That's why we adjust them now also to allow a proper comparable at the level of adjusted EBITDA. Talking about D&A, they continue to grow quarter after quarter, reflecting the increase in CapEx related both to diversification and to development initiatives in the core business. Slide 10. We show, as usual, our financial performance.
As you know, the first quarter of the year, typically generate cash, as the dividend outflow take place in May, and CapEx activity is usually relatively limited. This quarter is in line with this trend, with CapEx amounting EUR 5.4 million, slightly up last year, and mainly dedicated to development initiatives. Also, considering the EUR 6.6 million of working capital absorption, net debt at the end of March stood at EUR 113.5 million, compared to EUR 136.5 million at the end of 2025, bringing the leverage ratio to 0.6x .
The recurring free cash flow to equity, that we define as free cash flow net of maintenance CapEx and all non-recurring cash items, grew at around EUR 34 million from EUR 32 million recorded in the first quarter 2025. I will now hand the floor back to Roberto for the guidance and the final remarks. Roberto, please.
Thank you, Adalberto. As anticipated, the full year guidance provided in March remained valid. Our company and our business have demonstrated in the past a strong resilience in any macroeconomic environment, especially when inflation rise. The performance recorded in the first quarter is fully consistent with our expectation concerning the full year. Considering the persistent volatility in the energy market, the rationale for presenting and assessing our guidance at constant electricity price is still consistent. Under this assumption, we continue to expect adjusted EBITDA in 2026 to be broadly in line with the previous year, with underlying business growth offset by the negative impact from the level of non-core items.
In other words, if we excluded the impact of non-core items, we continue to foresee further year-over-year growth on an underlying basis, as I told us in the past call, which you can assume more or less around EUR 3 million. Underlying growth that is expected to be driven mainly by traditional business, thanks to the CPI link and expansion of DAB networks, with absorption from diversification stable or slightly improving. As for the potential impacts from electricity price not included in this guidance, in addition to the sensitivity already provided, we can indicate that at the current level of power futures for the rest of the year, the headwind compared to 2025 would be limited to approximately EUR 0.7 million.
Moving to investments, the maintenance CapEx is expected to remain closer to 2025 levels, which were significantly higher than historical average due to some extraordinary activities and the cyclical nature of some components. Development CapEx is expected to exceed the 2025 level in light of the acceleration, as already mentioned, on solar project, the extension of DAB network, and the expansion of the CDN network. I think that you will appreciate we haven't taken up too much of your time, and now we can now open the line for the Q&A session.
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 to please click continue on the pop up window. If your connected in the audio only, please press star and one on your telephone. First question is from Giorgio Tavolini, Intermonte SIM. Please go ahead.
Hi, good evening, thanks for taking my three questions, please. The first one is on the extension of the [credit lines maturities] to April 2028 under the same terms and conditions. This means that we should not expect any material improvement in the next financial charges for next years. I don't know if it's fair to assume some.
Let me hear when you can.
Do you hear me? If it's fair to assume some EUR 6 million, net financial charges on the-.
Giorgio, excuse us. We cannot hear you properly.
The line is very, very bad. Probably it's a problem with your mobile, I suppose. I don't know.
Oh, yeah. I will try to reconnect. Sorry.
In case we can also address after the call any question. Don't worry.
Okay. Yeah, yeah. Absolutely. Yeah.
The next question is from Fabio Pavan, Mediobanca.
Yes. I hope you can hear me. I would have two questions. First one is on the ongoing discussion surrounding the MoU. Was wondering if you guys are involved in this last mile of the conversation. The second question is on the hyperscaler you flag you're preparing for talks. Can you tell us more in terms of what is your expectations, first feedback from potential customers? Anything incremental would be welcome. Thank you.
Thank you. Let me say that, as I mentioned at this stage, the shareholder discussion is focused on governance structure and some requirements that are related with the legislative regulatory provision. I would like to underline also with our support, we are supporting for the possible definition of mechanism, including control ones, which depending on the stability they provide, will determine risk profiles and consequent evaluation.
Ciao, Fabio. On the hyperscale, let me start with the market situation. Well, let me say that the market situation continues to show a positive supply-demand balance, with demand remaining very strong in the cloud sector to which is being added the AI-linked demand that at least in Italy is still limited, set to grow. In terms of our expectations and feedback. Feedback, so far, no feedbacks, given that we are starting in these days the engagement with prospects. Let me say that from this engagement, in this engagement, we are keeping, we will keep all the options open in terms of potential model and cooperation.
We can offer the standard collocation, or an asset dedicated, totally or partially dedicated to a client. We are open to consider an independent development, or a co-development, with the user. No feedback so far, also because we have already scheduled the meetings that we will have in the coming days and weeks. The approach is the one that I just said.
Thank you.
The next question is from Milo Silvestre, Equita.
Yeah. Good afternoon, everybody. Some questions concerning the potential consolidation. If I'm not wrong, maybe the negotiation part. The relative part of the consolidation is not yet being discussed. I just wonder if you see the deadline of mid-June as mandatory or it could be also extended. The second question concerns your towers in the sense that TIM has provided an option to get an alternative network from INWIT. Just wondering if your towers could support INWIT or other operators in case of this transition.
Okay, thanks for the question. Let me say that, of course, this is a question more for the shareholders given that MoU is between them. Now we are providing, as I said, our support to speed up the analysis. Various condition commitments fall within the responsibility of the shareholders and clients. Let's see if we can reach an agreement and within what time frame. Considering the second question, let us start by saying that mobile operators are already our regular customers, particularly for coverage in remote areas, where, by the way, they are gradually upgrading their point of presence to 5G.
That said, beyond our day-to-day business interaction, we believe that the best-case scenario for the sector, the overall sector, and therefore also for Rai Way, is a win-win resolution to the current situation between INWIT and its customer that reaffirms the soundness and the validity and the visibility of the MSAs.
Thank you.
The next question is from Giorgio Tavolini, Intermonte SIM.
Hi. Good afternoon, thanks for taking my three questions again. The first one was regarding the extension of the credit line maturities to April of 2028 under the same terms and conditions. I was wondering if this means that we should not expect any material improvement in the net financial charges for the next years. I have some idea of EUR 6 million net financial charges on an alive base. The second question is on the digital infrastructure revenue line. You talk about the rising contribution from data center and connectivity. I was wondering if you can provide an idea of the contribution outside the tower hosting revenues.
I guess within the EUR 8.8 million revenues in this digital infrastructure and other, if you can provide some, let's say some, indication regarding the data center and connectivity lines. The third one, I think is a follow-up because I couldn't hear the previous answers. Regarding, I mean, last week there was an interview to Mr. Rossi, the RAI CEO, regarding the forthcoming MoU deadline. He talked about the need, the goal for RAI to adopt choices that are industrially sound, sustainable over long time.
I was wondering if we should expect, if we should assume that any, let's say any deal could come along with a deeper revision or harmonization of economic terms within of the existing MSAs. For example, I mean the CPI link, that is one of the, let's say, differences between EI Towers MSA and Rai Way's MSA. A deeper revision also in considering the current industry backdrop, when looking at what is going on with INWIT, TIM and Fastweb discussions on the MSAs. Regarding the reference to the sustainability, long-term sustainability of the, the future contract between RAI and Rai Way. Thank you.
Let me take your first question on the credit lines. Basically, we had a very interesting terms, and so we decided to extend the expiration date of our financing. This means that theoretically, we should continue to expect, without theoretically, we should continue to expect a growing trend of our net debt. Even if here really the game changer will be the hyperscale because is the most important initiatives in term of absorption of our financing needs. Without that, I would say that the proxy that you mentioned, if I'm not wrong, you mentioned EUR 7 million seems fair.
Of course, on top of this, to the extent we will start with the investment for the hyperscale, we should expect then a progressive increase. On the second question on the digital infrastructure revenues, I would say that
Of the EUR 8.8 million of revenues that we see in the slide, the majority, EUR 8.4 million, is mainly related to tower hosting, while the residual amount is half data center and half connectivity.
Concerning the third question, let me say that we cannot enter in some kind of details. I'm sorry, but it's evident. Let me say the spirit is that I think this side is looking for a stability environment for the company. According to that, there will be make all the evaluation between the shareholders.
Okay. Many thanks for your answer.
As a reminder, if you wish to ask 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 on the Q&A icon or press star and one on your telephone. Gentlemen, there are no more questions registered at this time.
Thank you, Maria. It's okay. We thank you all the attendees of the call and wish you a pleasant evening. Goodbye.
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