Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the WIIT S.p.A. nine-month 2024 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. Alessandro Cozzi, Chief Executive Officer. Please go ahead, sir.
Thank you. Good afternoon, everybody, and thanks for joining this conference. The Board of Directors of WIIT approves the results for the first nine months 2024. You can follow with the presentation I sent an hour ago. We can start to present the figures, and after the presentation, there is a possibility to have a Q&A session. I start with the highlights of the page number three of the presentation. Revenue adjusted growth: 19.7% to EUR 115 million, compared to EUR 96 million last year. EBITDA adjusted growth: 12.9% at EUR 42.6 million, compared to EUR 37.7 million last year. EBIT adjusted growth: 7.2%, EUR 32.5 million, compared to 21 million last year. Net profit adjusted growth: 4.6% to EUR 12.2 million, compared to EUR 11.6 million. Net profit reported growth: 50%, EUR 10.2 million, compared to EUR 6.8 million.
Net was adjusted with excluding the IFRS 16 impact and including the value of the treasury share at the value of end of September, was EUR 161 million, compared to 154% of the previous year. In the page number 4, there is the breakdown of the revenue and the EBITDA. Italy closed the first 9 months with EUR 44 million euros, with 38.5% of the total growth revenue. EBITDA in Italy was very, very good because EUR 20.5 million is 36% EBITDA margin, is very, very good, and is 48% of the total group EBITDA. EBITDA margin in Italy was 9 million, and the EBITDA margin was 20.2%. Germany is running good, well. Revenue: EUR 51.7 million. Over half of the business now of WIIT is based in Germany. In terms of EBITDA, the result is very, very good. EUR 21.8 million is EBITDA based in Germany.
The EBITDA margin is 35.4% in Germany. EBITDA margin was 14.4% in Germany, and the EBITDA margin is 23.2%, higher than in Italy. Switzerland, the new country we opened this year, current year in May, is a turnaround company. We need to remember that for this reason, the profitability is lower than as usual in WIIT. Revenue is EUR 9 million. The consolidation started from 1st May. So in these figures, we have only five months of revenue. We just achieved a break-even in terms of EBITDA. It's close to zero, but it's positive, is EUR 300K. And currently, we have naturally the effect of in terms of amortizing, the EBIT was negative for EUR 800K in this period. The page number five, in terms of growth of the revenue, the organic growth was 6% average. Italy's organic growth was 4.8%, 5% in terms of core revenue in core services.
In Germany, the organic growth was a little higher, is 7.6% in this period. The contribution of the new acquired company is EUR 4.4 million related to Edge & Cloud asset deal closed in first April. EUR 9 million is the total revenue of the Econis AG, the company acquired in Switzerland, also in the first of May. Page 6, the detail of the revenue. Current level, 86% of the core revenue is recurring. In Italy, we have 84% of the core revenue recurring. In Germany, 99%. In Switzerland, 68%. The core revenue growth is 94% and a large part based in Germany and in Italy. Page 7, there is the detail of the profitability of the company. We are very, very happy for this result because we can show here the improvement in terms of margin like for like without the effect of the acquisition.
Naturally, every company we acquired, we have a little dilution in the margin because the company acquired the first day is not running, is not performing with the same level of EBITDA of WIIT. For this reason, the EBITDA margin is 37%, but if we realize like for like without the acquisition, without the M&A effect, the margin was 41.6% compared to 39% of the previous year. In detail, in Italy, the margin was 46%, improved a lot compared to last year, was 43%. In Germany, we are very, very happy to show this result because this is the effect of the extraction of the synergy of all the company acquired and the strategy to put more high-value services on all the customer base acquired.
If you analyze these figures in Germany, the average is 35%, but the like for like margin without the M&A effect was 38% or 41% if we exclude the consultant business, compared with 33.8% total revenue last year and 36% without the consulting business. EBITDA margin is growing like EBITDA, and if you go directly to page number 9, in terms of the figure of net debt, we closed gross debt EUR 250 million. The cash increase was strong, EUR 27 million. In this period, we are impacted by the acquisition of Edge & Cloud. We paid in April and the Econis in May. A small purchase of treasury share for EUR 700K. The CapEx at the end of September, we have EUR 22.8 million of CapEx. Consider that the budget for the full year is EUR 27 million.
At the moment, currently, we expect to stay in line with the guidelines in terms of total CapEx expenditure for the current year. In this CapEx, we have IFRS 16 for EUR 12.7 million and dividend paid totaling EUR 7.8 million. That's all. We are ready for the Q&A.
Thank you, sir. 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 the touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question comes from Giorgio Tavolini of Intermonte.
Hi, good evening, and thanks for taking my questions. The first one is on the current trading. I was wondering if you can provide more color on the organic growth trends going through Q4 and also what to expect for 2025 in Germany after the acquisition of M&P in terms of contribution. The second question was actually a clarification. I was wondering why the EBIT margin in Germany is much higher than in Italy. I guess you have a greater number of data centers, so I was wondering why maybe the amortization is higher. I don't know, and the second point is why the recurring revenues are 99% in Germany, so there is a great gap compared to Italy, so Germany is quite a new country for you, so I was wondering why there is this gap. Thank you.
Okay. I started to answer the first question about organic growth. Naturally, we will be connected here. Our team can naturally enter in discussion to give more color, but in general, in Italy, we are totally in line just now on the full budget in terms of booking of sales. That means we expect next year in Italy to grow to high single digit from 8%-10% in terms of sales of core revenue. In Germany, we are a little delayed. It's not bad, the result, but the pipeline, the sales project is good. Our expectation is to close something deal. We are in the final phase in the next two, three months. That means for the German total, we expect to grow to high single digit for next year. This year, we have a little delay in Italy in terms of activation of new contracts.
For this reason, the organic growth was a little lower than in Germany, but now we are recovering well. In the last quarter, we expect to close the migration, and we estimate a step up in terms of core revenue from 1st January 2025. The question about the EBIT no, sorry, the EBIT margin in Germany is higher. Yes. The reason why in Italy we have more amortizing is actually the business in Italy is more positioned to the high critical application. In Germany, we have 25% of the business like WIIT in Italy, and the others are more traditional data center and IaaS business. In Italy, we are more focused on this business, and this business needs more enterprise storage and hardware, more expensive. So we are more CapEx to support these critical apps.
This is the reason why we are a little more amortizing, and there is another strategy and another reason. We centralize in Italy something CapEx, and after we provide to give our German company something software, so we do the CapEx in Italy, and after we provide the software at our subsidiary. For this reason, we have more CapEx in Italy than in Italy, but the main reason is the focus in critical apps and more high requirements in terms of resilience and performance in storage, and the cost of this platform is higher than the traditional storage in Italy. In Germany, the data center is fewer in reputation, so we don't need additional investment to improve the capacity. Currently, Italy's occupation rate of the data center is 40%, and Germany is 60%. For this reason, this is another reason.
We opened in Italy another data center last year, and we doubled the capacity, and we have naturally more amortizing.
Okay. And regarding the recurring revenues that are almost 99% in Germany compared to Italy?
Yes. Consider that 90% of the core revenue. If you consider the total revenue, it's a little lower. Okay. The reason in Italy we have more projects for the migration is the main reason. In Italy, we have more big clients, and the average of the size of the deal actually is higher in Italy. Usually, in this contract, there is a small part, but there is to migrate the customer from an internal on-prem data center to our cloud, and the customer pays full attention to the project, and for us, it's more current. It's not inside our IRR.
Okay. Thank you.
The next question is from Domenico Ghilotti of Equita.
Good afternoon. A few questions. The first is related to the Econis integration because if I'm not wrong, you were targeting some EBITDA break-even in Q4. So I'm trying to understand if you are running ahead of plan or if you had some, say, one-off, positive one-off in Q3. And the second is on German profitability that was particularly strong, and if I'm not wrong, also significantly up compared to the second quarter. So here again, I'm trying to understand if this improvement, apart from, say, the M&A dilution, is structural. So on an organic basis, if you are really able to run at this level going forward.
And last but not least, so on the pipeline for the German business, so if I understand well, you are confident to be able to deliver the high single digit organic growth for next year in Germany, but you need to close some contracts that are in the pipeline. I understood properly?
Yes, so I started to answer. Sorry, I revised the last question about organic growth in Germany. Sorry. Okay. The first question about the Econis, our target was to achieve a break-even point at EBITDA level for the last quarter of this year. To be honest, we anticipate we are happy because we just obtained this break-even in Q3. It's not related to one-off account activity, but it's a strong reduction of cost in terms of lease and external data center. Okay. The new target, we change it still with our management team in Germany because at the moment, Germany is driven by our German guys, and the new target is to achieve EBIT margin positive in the second quarter of the next year. EBITDA is just done.
It is a very good result because when we bought this company, it was very, very negative in terms of EBITDA, in terms of EBITDA. Our target now is to achieve a positive EBIT level for the second quarter of 2025. Germany is running well, and it's correct. It's a little higher than our expectation. The reason is a little seasonality. Vacation impacts a little bit the cost of the salary. In Germany, the revenue is all recurring. That means we have less cost of employees during this period, and we have a good impact of the last acquisition. There is a good result in terms of cost synergy extraction from Edge & Cloud, and we expect for the last quarter of this year the same level of profitability because the revenue continues to grow organically.
Then in the last quarter, we have not the same impact like the summer, but a smaller reduction in terms of cost of salary for the Q4. The revenue continues to grow organically, high single digit. In terms of the next year, we expect if in the next two, three months we close the two contracts we have in pipeline, confirm an organic growth in Germany, 70% for the last year.
Naturally, it depends a lot on the timing of the close of the contract because these two big contracts we have in pipeline need that means we have a bigger transition, and we are in a migration period, six months, like usually the contract we have in Italy because now Germany is following the Italian business, but that means more timing in terms of migration, more time in terms of activation of the contract, and the revenue is a little shift in the time after when the migration is handed. For this reason, I prefer to stay 5%-7% because in this type of contract, the duration of the migration is not totally under our control because the customer needs to check the application to collaborate for the migration. There is third party without our direct responsibility.
Okay. If I may add just another question is on if you can comment on the recent contract you announced. So you had an extension that was also an upgrade in size. So if you can give us some color on that.
Yes. Naturally, this contract is an important upselling of one existing customer of Matika, a company acquired in Italy in 2020, and after two years inside WIIT, we upsell from a basic cybersecurity services only for the Italian subsidiary. We expand spread globally in all the countries, the cybersecurity, but most importantly, the migration of all the applications in our cloud, so the contract original value was roughly EUR 120,000, 100K yearly value, and we spend over EUR 500,000 yearly value. In the same period, we are also to give you much color, we are in the final phase to renew our two important contracts with two of the five big clients, one in Germany, one in Italy, and hopefully, we can disclose over the next two, three weeks on the market the value of this renewal contract. That is only renewal of the actual revenue.
We don't have upsell in this case, but it's very important because five years extension makes sure the revenue for the company for the next two, three years.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your touchtone telephone. The next question comes from Gabriele Berti of Intesa Sanpaolo.
Hi. Good afternoon, everybody. Thank you for your presentation. A couple of questions from my side. First one, can you remind me if Econis and Edge & Cloud are subject to seasonal effects? I mean, should we expect to see more or less the same contribution as in Q3, in Q4 clearly, or any significant difference? And then if you can provide the usual update on M&A pipeline.
Yes. Consider a very, very low impact in the Econis in Edge & Cloud because they are smaller inside the group, the size of the company. One is 4 million EUR, 6 million EUR revenue, and the other one the same. There's no material impact for the season. Okay. In terms of M&A, we have a very, very good pipeline. We consider to continue the consolidation in Germany. The last one I need to the last one we enclosed to this wall is a company that is perfectly matching with our indirect channel in Germany. This company provides platform. It is a client of WIIT, actually in Germany, just our client, and he provides services for notary in Germany. It is perfectly matching with our acquisition we had two years ago, LANSOL, to provide for tax advisors.
The merger of this company inside WIIT, we can extract EUR 1 million synergy in the next 18 months. We have additional targeted pipeline always in Germany, a mid-size provider. The target that we are discussing now is another in the range from EUR 3.5 million revenue, EUR 4 million revenue, and in Switzerland. In Switzerland, we want now, after the achievement of the turnaround, the strategy will be to find a good acquisition to increase the size in Swiss. The discussion is naturally in the early stage, but we have two targets on the table in Switzerland and another two in Germany. We continue to prefer currently to consolidate the German market because the German market is a growing market.
We see in our figures 7% organic is a very good result, but we can accelerate more now because the size we have in Germany, we start to receive benefits for the size, for the reference we have, and the pipe now is increasing. We think in the next two years, we can grow very, very higher in Germany than Italy. Currently, we are growing more in Italy in terms of volume of sales, but the potential we have in Germany is still higher for the next two, three years.
Okay. Thank you.
Once again, if you wish to ask a question, please press star and one on your touchtone telephone. The next question comes from Giorgio Tavolini as a follow-up from Intermonte.
Hi. I would like to know if perhaps you have any plan on your financing to refinance in advance your existing bond or if you're happy with the current capital structure?
Our bond maturity is October 2026. Naturally, we stay within the window to see the market in terms of interest rate. Sure, next year, if we see that the interest rate returns to good position, good level, we can go on the market. Currently, we don't have the necessity currently to find the refinancing of the bond. Consider that all these small transactions I talked before in Germany and Switzerland, the enterprise value is always in the range from EUR 4 million to EUR 8 million. We can pay that with the generation of cash we forecast for next year because, consider that the CapEx next year will go down from EUR 27 million. We estimate to go to EUR 22-EUR 23 million.
And the EBITDA, we forecast to increase the EBITDA because the organic growth pushes up our revenue, and the economy scale we have, and we have the residual part of synergy to extract in the acquisition. So the EBITDA, we expect to increase, and the CapEx decrease. For this reason, we can finance this small acquisition with a cash generator.
Regarding the depreciation and amortization, should we expect an increase by EUR 2 million next year in the range of EUR 29 million for the ordinary D&A, I mean, excluding the PPA, roughly EUR 29 million if it's, I don't know, a good estimate in your opinion?
Stop. We also forecast amortizing for the next two, three years. The CapEx depends a lot on the M&A, Giorgio, because like for like, sure, amortizing goes down because following the reduction of the CapEx, but depends a lot on the M&A. For example, the Econis increased the amortizing to EUR 2.5 million yearly with the IFRS 16. And the new acquisition in Germany has an additional probably EUR 800K of amortizing. Like for like, sure, the depreciation will go down, but with the M&A, we increase the amortizing.
Yeah. Okay. Thanks.
The next question comes from Domenico Ghilotti of Equita.
I have a question on 2024. So I see the consensus targeting something like EUR 56 million EBITDA, if I'm not wrong. So it is correct, the Bloomberg consensus. So it implies Q4 not particularly strong. Do you feel confident about consensus? Do you see some upside on that number, or maybe, okay, that's fine, and we will see?
Currently, we are a little optimistic because naturally, if you consider EUR 42 million at the end of September, EUR 14 million for the first quarter is still achievable. Naturally, we can do it better, but at the moment, I don't want to comment. Sure, it's achievable. 56 is achievable, sure. The last quarter depends a lot. Some years, the customer asks more, has more budget, asks more. It's not all the year the same situation. It depends a lot on the requirement of the client. But sure, 56, I mean, is very, very achievable.
So Q3, as you were mentioning, Q3 has also really some favorable seasonality due to labor cost, and so it's a level of profitability that, okay, you are not planning to repeat.
What I see is sure a step up first quarter because in the last quarter, we have a lot of activation of the new client, and we don't have a big effect in the Q4, but sure for Q1. So we expect the increase of the recurring revenue part in the Q1. It is very important because it's a part of the revenue, more resilience, more confidence in terms of stability.
So the order intake that you had will translate into a higher recurring revenue starting from 2025. And so you are starting with a good level of revenue growth already in Q1.
Correct. Consider that we have only in Italy, we have roughly EUR 3 million yearly value of contract in phase of activation. That means quarterly, EUR 500,000 more revenue recurrent for the Q1. This is our expectation.
Okay. Thank you.
For any further questions, please press star and one on your touchtone telephone. Mr. Cozzi, there are no more questions registered at this time, sir.
Okay. Thanks to all who joined this conference, and we have data about shortly, I hope, with a new renewal of this big client, and naturally, in case of additional information on the market. Thanks.