Good afternoon, this is the Chorus Call Conference Operator. Welcome, and thank you for joining the Wiit full year 2025 results presentation. As a reminder, all participants are in listen only mode, and 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, CEO of Wiit. Please go ahead, sir.
Thanks. Good afternoon, everybody, and thanks for joining the call. This morning, the board of directors of Wiit approved the results of full year 2025. You can follow with the presentation I sent. I will start with the highlights. At the end of the presentation there is a possibility to make a Q&A. I can jump start to page 3, the financial highlights. Revenue growth, EUR 167 million +5.9%, compared EUR 158 million of the previous year. The most important figure is the RR. The recurring part of our revenue was, EUR 156 million compared with, EUR 156 million of 2024. 88% of the revenue now is recurrent. This is very important to have high visibility with figures for the current year and the next following years.
EBITDA growth more proportional than the revenue growth for the scalability of the business was EUR 66.9 million, totally in line with our expectation and our budget. Compared to EUR 58 million of 2024, it's a big jump. Consider that we don't have the effect, it's all fully organic and thanks to the synergy obtained in the last year. Margin was 39.8% compared 36% 2024, like for like 40%. We increased the EBITDA margin over 3% in the last year. EBIT very, very good, EUR 34 million compared 29 +17%. EBIT margin was 30% compared 18. Over 2 points more.
After you can show the Q4 effect because the EBIT is growing very fast in the last part of the year, thanks to the stabilization of the CapEx and the scalability of our data center. I can show after in another separate slide. Net profit was 16.5 plus 11%. We have here a strong effect of tax rate because for the last year we have a little more tax compared to 2024. In 2024 we had a specific one-time effect of the Patent Box of one company acquired, and for the last year we don't have this specific one-off. In a previous approach, we don't account anything about the Patent Box in Italy. Currently, we are talking with the tax office to discuss the renewal of the Patent Box.
In these fields we don't consider nothing about tax effects. Net debt was EUR 156 million, the leverage compared to last year and totally in line with our expectation. Consider that we have the strong effect of a treasury share, because the company bought a lot of treasury share during the last quarter, and thanks to that the net debt decreased a lot. In the slide, you can go to slide page number 4, the breakdown of the figures. Italy was closed with EUR 58.6 million revenue. RR was very high, 91%. 55% of revenue was totally recurrent. Big jump in terms of EBITDA to EUR 51.8 million, 54% of the revenue.
Big jump compared last year, thanks to the scalability of the assets and the end of the realization of the operation happened during the full year. The same results very good in term of EBIT. Italy growth strongly to 33%, EUR 13.8 million. Very in a growing way in the last part of the year. Germany, EUR 89 million revenue, 68 total recurrent. 93% of the business cloud is recurrent. EBITDA stable, 36%, little growth but same, not so strongly growth. EUR 32 million in term of EBITDA and 19.6 in term of EBIT. EBIT margin was 32%. Swiss. Swiss is showing complete end of the turnaround.
We complete the clean of the low value revenue because it was EUR 20 million and RR was roughly EUR 13 million, and the EBITDA was positive for EUR 2.5 million. At the end EBIT positive, starting from a - 11 in the previous year to EUR 600,000 positive EBIT at the end of the year. Totally group level EUR 156 million RR, roughly EUR 67 million EBITDA, and EUR 34 million of EBIT margin. We update in the part number 5, the concentration of the customer base. It's important for the company continue monitoring how is the dependence we have of the single client. We confirm that we don't have the dependence of the first client.
The top 20 client value is 29% of total revenue, and the top 50 is only 43%. Very important, the increase of the average of the deal size. The top 200 client top account, the average yearly of the contract now is over half million EUR. It's EUR 521K average for client. The top 10 is increasing from EUR 200 million to EUR 3.3 million yearly revenue. That means we are selling more premium services in a more large customer base. That means at the end, more resilience of the business and a very, very high barrier at the exit. The more bigger is the deal, more low is the risk to the migration when the contract is to maturity.
We are in a good, correct way in terms of sales. High visibility of the business, the slide, page number six. Backlog is increasing from EUR 247 million to EUR 260 million. Naturally depends a lot on the single year when you have to renew the contract. Not all the years are the same in terms of expiry or maturity of the contract. In general, it's going. Starting from this quarter, we like to show, to disclose not only the full result, but the single quarter effect, to understand how the business is going in the single quarter. Totally, we anticipate Italy grew organically 7.8%. Germany is more stable, because we are...
I just anticipate we have a part of the effect of the one big churn we had in the summer. The effect in total revenue is partially in 2025 and mainly 2026. It is one client. It is not a churn, I mean, not related to customer satisfaction or competition. It is one M&A. One bank in Germany bought another bank and started to migrate data center in their own facilities. That is the main effect. It is one time, extraordinary and the churn effect is mainly in 2026. Chart number, page 8. EBITDA growth in Italy very strongly from EUR 27.7 million to EUR 31.8 million.
In Germany, whatever we have, despite we have partial effect of churn, we grew a lot from EUR 29.2 million to EUR 32.6 million. If you see the Q4, Italy is growing EUR 1.2 million more in terms of EBITDA. Germany is stable, because the activation of the new contract signed during the year fully compensates the effect of the churn in terms of revenue and costs. EBIT, page number 9. This effect is more important in terms of EBIT margin because you'll see later we have a fantastic effect in terms of CapEx. Cash CapEx are reducing compared to the last year. This effect we will see naturally in the EBIT margin.
In Italy, we grow from EUR 2.6 million quarterly to EUR 4 million, and in Germany is a little stable. That means that Italy, the EBIT growth from eleven and a half million to 13.8, in Germany from 18 to 19.6. The effect of this CapEx reduction we see more strongly during the 2026, because we expect to have less amortizing for roughly one and a half million for the current year, 2026. It's partially inside 2025, the main benefit we have inside our balance sheet 2026. CapEx, what I anticipate, page number ten. In this chart, we have the breakdown because a lot of investors ask us how is the breakdown of our CapEx, we decided to give more color about the CapEx.
You can see here, the cash CapEx coming from EUR 26.7 million to EUR 24 million. Because the utilization rate of data center is very, very low. In Italy, we have 51% occupation rate. In Germany, for the premium part, 53%. Other part, IFRS, is EUR 7.6 million, is the effect of the signing of the lease contract for the space of the offices. The IFRS depends on the single year when the single contract expires we need to renew and we have the CapEx effect, but is no cash. The cash CapEx was only EUR 24 million. 13 are maintenance and 10.7 was growth CapEx.
EUR 13.3 million maintenance CapEx means all the CapEx we did to maintain, update all the customer base, all the active contract. If you don't have organic growth, we spend only EUR 30 million to maintain updated technology. Going down the slide, I go now on page 11. The bridge on net debt starting from EUR 212 million end of 2024, we close growth with EUR 224.8, mainly driven, you can see here, by buybacks for roughly EUR 60 million. If you don't consider this buyback, we close with EUR 208 million net debt. We decided to buy strongly our share because the price was very, very competitive and at the end was probably a good decision.
In any case, we can use this treasury share to finance part of M&A. In general, you can see here, EBITDA EUR 66 million, cash CapEx EUR 34 million, income and tax EUR 5 million, interest paid EUR 9.8 million, includes partially the new bond issued in October 2025. Organization means the cost to have cost reduction of salary in Italy and Germany during the first and second quarter. The new bond cost, amortizing cost of the issue of new bond, EUR 200 million, M&A and mainly dividend and the buyback.
If you deduct the debt IFRS 16 for the end of the leases for EUR 11 or 12 million, and the value of the treasury share at the end of December for EUR 56 million, the net of this debt was EUR 156 million. The leverage was very strong. You can see in the next charts at page 12. Here we want to show how was the future of the company in the last five years. Naturally includes a lot of cash out for acquisition because we spent 180 mil-
60 in, Germany.
EUR 160 million in Germany to finance M&A and 40, roughly 40 million in Italy. Whenever we have EUR 200 million cash out to finance M&A, we deleverage a lot the company from, if you consider gross debt from 5.2 to 3.4, if you consider the value of the treasury share from 4.2 to currently 2.6. We consider below 3x a very, very safe trigger to stay, or we want to maintain our company in this range below 3x , and we are just in line with our target. The fifth, I think. The board of directors this morning approved an additional issue about partial cancellation of the treasury share. We consider that currently the company own 12.5% of the share capital.
At the current market value is roughly EUR 95 million, and we decided to cancel 6% of the treasury shares. We propose naturally to give opportunity to our shareholder assembly to cancel 6% of the shares in our next meeting at end of April. We approve these figures. Obviously, we show last year a lot of transactions about sales and leaseback of data center assets. You know, we have in Germany a full set of data centers, 17 data centers. We start evaluation with advisor to analyze the possibility to sell the back part of our data centers, not the premium part, the traditional data centers, to raise cash to finance M&A. M&A is currently a priority for Wiit.
Consider that after the decision of Broadcom to cancel large part of the VMware Europe, we receive weekly opportunity to analyze to do an M&A in Germany, in France, in Italy too. What do you think the next two, three quarters, we'll start materially to do M&A. Analyze to sell part of the asset with the sale and leaseback process to raise money on top of the cash we have on hand from the bond and part of treasury share to finance an external growth of the group. That's it. We are ready for the Q&A.
Okay, 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 touch-tone 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. We will pause for a moment as participants are joining the queue. First question is from Giorgio Tavolini, Intermonte.
Hi, good afternoon, and thanks for taking my questions. The first one is on the sale and leaseback opportunity of your German data center. I was wondering if you have any idea of potential cash in and in terms of let's say impact on your leverage in adjusted leverage including the lower IFRS in that sense or higher IFRS, sorry.
The second question is on your recent admission to the Broadcom Advantage program you were mentioning. We should expect an acceleration of the M&A activity as you were mentioning, but also I guess some commercial traction from 2027 onwards. I was wondering if you expect an additional growth of the top line from this event. The third one is on the price increase. I saw that OVH raised the pricing on their offers given the rising costs for electronic equipment. I was wondering if you are planning to replicate a similar price increase. Thank you.
Okay. I start to answer the first question about the transaction about data center. Depends on the perimeter. We assume that it's roughly 7 megawatts, the perimeter to data center to the sale and leaseback. The levels depend if you consider the debt difference for the rent or not, naturally. Because naturally we need, we want to have for 10 years the right to use all the asset sale. That means we put in our debt, naturally, all the contract of 10 years, the contract of the leasing. But it's sure over EUR 100 million cash. You consider the transaction in the last year, the multiple was from 18-22x the subject of the carve-out. This is the answer. For this reason, it's material for Wiit.
That means that the debt, if you don't consider the debt, the rest is, of course, go to zero with the carve-out. If you consider naturally the rental debt is different. You have cash on hand, you have debt to pay in 10 years. But the cash you can use immediately and the debt on the other end, you are paying in 10 years. Okay. About the firepower, consider that we have currently EUR 50 million cash of the excess of the bond we raised in October. We have additional EUR 40 million of treasury share, considering canceled half of the treasury share. In addition, EUR 40 million of finance. So we have currently EUR 140 million current views, plus the cash arriving from the carve-out.
That means we don't need capital increase to finance M&A. This is the message. One hundred forty plus the carve-out, that means EUR 240 million for power. Okay, second question about Broadcom M&A. Naturally, Broadcom accelerate the consolidation in Europe. Naturally is not a short term feedback on the market. At the end, the older partner with Broadcom have an maturity expire the contract with by the end of June of 2027. That means by end of this year, need to take a decision with which partner they want to join the next three years to guarantee the continuity of the relation of the client.
Because otherwise they need to decide to leave this business or sell the data center, the M&A, or find a new partnership with one of the residual certified partner.
It is difficult to migrate.
It is very difficult to migrate. In terms of organic growth, we have just now an increase in the pipeline for the next year because Broadcom canceled not only the provider partner, but the white label program. That means a lot of software house now is no more enabled to sell VMware product inside the services. They need to find another partner. We have an increasing pipeline for the big software house. Otherwise, we have opportunity to find a new partner for our indirect channel. Enrico, do you want to tell more about on the-
Yeah. Yes.
It's mainly related to indirect channel.
Yes. As already introduced by Giorgio, there is a commercial traction related to this effect. For sure into the indirect channel, several players are looking not only to the Broadcom topics. It is a kind of acceleration of the looking for a new strategy. Part of having the benefits of having a Broadcom partner is not belonging only to the Broadcom effect, but also to the effect, for example, that all the cloud native platform that we deployed over the last three years is a potential new acceleration for other players. We already have seen an incremental pipeline coming from this relevance, because we are talking about a relevant amount, of course, that technology that accounts for several million EUR. We are very happy for that.
Doesn't mean that we already signed all the contracts, so it's a little bit early.
To forecast now.
To forecast now.
I think end of June we are more clear there.
July.
July, about 2027 figure. Consider that this Broadcom policy impacts our balance sheet in 2027, not 6.
Yes.
Because we have the timelines with the migration.
Yes.
Contract. We have more visibility in the middle of the summer to understand how the real impact of 20-27 is.
Of course, this means that under this, we have the umbrella to operate in all the countries that we are operating currently. That means Switzerland, Italy and Germany, and also the new country, potentially, because M&A is not finished.
No.
This is important. The fact in all the countries has been very, very huge. Italy, the result is we remain one of only four Italian providers to operate. In Germany.
Nine.
9. In Switzerland, 4 or 5. Quite relevant impact. We will see the effect in the following months. We had an increasing weekly amount of meetings with C-levels of partners and clients as well.
The first question about price increase, we actually naturally is most exposure on the technology layer. We not so much, but we naturally update our price list with the new cost of service storage. For it is not so material because all the infrastructure part is 25% of the value of our contract. Naturally, we increase the price, but all the providers are increasing price. It is not a issue on the table because for all the providers, we have more cost for memory and more cost for servers. And probably who have in the storage, in warehouse or more server have a big advantage for the single quarter. If you see full year effect is no material.
Many thanks.
Next question is from Domenico Ghilotti, Equita.
Good afternoon. Well, the first question is a follow-up on the sale and leaseback. I want to better understand the rationale why, for example, you are considering Germany but not Italy. Why are you referring to the less premium part of the data center? If you can explain if there is any negative from, say, from the managerial point of view of having a leaseback the asset. If you have, say, the option to regain the control at the end of the leaseback so.
Okay. The first part question is why not all the data center? Because we want to maintain internally the full premium data center. In Italy, we have only premium data center and the new one in Germany. The occupation rate I told you before was related to the premium part. The other part are fully utilized data center with all the small part of colocation. The old business we had in the first company acquired in Germany is only 12 million revenue in terms of colocation.
Thirty?
EUR 12 million.
Okay.
EUR 12 million. In Germany, 70 is 20% of the total revenue in Germany. We don't want to transfer the customer base. We want to maintain all the contract with the client, only to transfer the asset and sale and leaseback. We guarantee a lease for 10 years. We want to guarantee for 10 years the right to pay lease for leasing and the free cash flow naturally. We want to maintain the customer base. For the more traditional business colocation, infrastructure without managed services. Because just now all the premium part has migrated in our premium data center. All the premium part, the value part is hosted by our premium data center in Germany. We have additional 8.
To understand 7 megawatt is roughly 7 or 8 data center with not with the premium service inside. Colocation, more IaaS, bare metal business, not exactly in our core now. Energy impact. We don't have impact because we have a fixed rate in Italy for 7 years and Germany for 3 years. We fix the price for PV for 7 years in Italy and for 3 years in Germany. In fact, we don't have impact of fluctuation of the energy price.
I haven't asked yet, but actually it was my next question. On the synergies you have already answered. Last, you were mentioning the churn affecting more 2026 than 2025. If I look at Q4, should I assume that Q4 has already, let's say, seen the full effect of the churn in Germany or is not yet a run rate, a stable run rate?
is that we are in the middle of the river. It's partially inside, yes, but the full effect we have in 2020. It's one client, the main one client. The value of contract is roughly EUR 5 million. We have 2 million economic effect in 2025 and 3 million in 2026.
Okay.
Partially Q4 is done, but there's no full effect.
Okay.
We have the residual part. The good news is the gross booking in Germany was higher than 2024, and we have a full compensation in terms of revenue. For this reason, the budget 2026, we expect lower single digit growth in Germany, whatever we have this big churn. Because the gross booking fully compensate the churn. Naturally, we have.
The single digit is on a RR including the churn?
Yes, we expect to grow in the high single digits.
Germany. In Italy, we expect to grow faster because in Italy we don't have this big. The sales in Germany are accelerating. This is very important. Accelerating in the current way, let me say. We are accelerating in terms of gross sales with more high value contract compared last year. Last year, we closed roughly 25% of the booking high value. The target of our sales group in Germany this year is to sign 50% of the gross booking on premium sales. The MBO and all the budget and the bonus, this for the current year is related, is targeting on the premium part.
There are accelerators specifically designed last year first, and it's been the signal and this year is also accelerating as well.
Thank you.
Next question is from Giovanni Salvetti, Berenberg.
Hello, everyone. Can you hear me?
Yes. Yes. Yes.
Okay. Well, I mean, I think part of the question has been answered before. Just to have maybe the confirmation of that. If I look at the end of the first half results, you said that the utilization rate was around 40% in Italy and 70% in Germany. Should I assume that this 70 was like the overall utilization, including all data centers, or is it just the premium one? How should I think about this?
No, it's only related to Premium Cloud. We changed the communication because it's more important to be aligned with the market. In this chart, when we declare 51% Italy and 53, it's the premium part. The other part is 85% probably part of the parameter we are evaluating to take care about. The premium part.
Okay. Thank you.
As a reminder, if you wish to register for a question, please press star one on your telephone. Next question is from Michele Mombelli, TP ICAP Midcap.
Hello. Hello, Alessandro. I just wanted to ask you something, as a follow-up on the question of my colleagues that already asked very brilliant questions. Maybe it's a little bit more general on the industry. I'm curious to know how you're dealing, what do you think about the sovereign cloud solution coming from the hyperscalers? Because it's something I've been reading a lot and I know there is a CLOUD Act playing in it, but I would like to know if it's a real substitute of your offering, because basically starting from the last year after the Trump tariffs, your the equity story around Wiit has been, you know, reached with the narrative of the data sovereignty cloud. I would like to know, what do you think about that?
That could have any kind of, you know, legal barriers and compared to the European solution that you offer. Thank you.
I will answer on behalf of Alessandro.
Mm.
It's a very relevant topic.
Mm.
I'm facing really a boost this in the last 2, 3 months in all the regions, not only in Italy, on this data sovereignty. One of this effect that was totally unexpected, that we are opening discussion with Italian banks.
This is a new.
industry for us.
Yes, it's absolutely new in Italy.
Yes
Because we have of course in Switzerland, minor in Germany, but absolutely new in Italy. It's becoming a rising concern. In Germany, it's already a concern. In Italy, it's becoming a rising, not only for the data sovereignty itself but also belonging to the fact that the clients in general are starting moving heavily on digital transformation, also using AI. This topic is totally absolutely linked to the intellectual property of the data. Not only where the data are hosted, who is maintaining, but the fact that into this data, there are the foundation of the Generative AI and AI itself. They are all linked together. This is more or less the blueprint of every single discussion I'm having with the clients.
I closed one call with a CEO a few minutes ago talking exactly around this topic on an Italian corporate an industrial corporate spread across the globe. The discussion were we are opening signing a new contract with this client. The discussion is we have to open other tasks that are AI related. We want total data sovereignty because it's a mandatory topic for us to operate. Absolutely it's becoming a rising topic. There will be also another effect in the next month belonging to the fact that one particular analyst is starting mapping Wiit as one of the player into the sovereignty cloud. This is becoming another interesting effect.
They are all linked, AI, data sovereignty, Broadcom, cloud native, because all the clients are starting to look for alternatives to the hyperscaler. Sovereignty means also getting out of on-premise stuff like that, but also rebalancing the power of the hyperscaler. That means having alternatives on the cloud-native platforms that until the last two years they were not really a present story in Europe.
Thank you for the answer. Now, just because I saw some kind of major telecommunications player from Italy, I wouldn't talk about the Telecom Italia, for example, that closed a partnership with Microsoft and they were mentioning a lot the cloud sovereignty. I think they could steal some kind of market share from the narrative of Wiit of being indeed a, you know, a European player for European companies. Of course, it is a big topic for you, a good selling point for your, for your, you know, architecture.
I would like just to know a little bit better if and how American hyperscalers have been, you know, encountering some kind of maybe major forces from European legislation in order not to operate and not to steal a kind of market share that otherwise Wiit would have been, you know, involved in. I don't know if you have any kind of comments on this side. It's more on the American side rather than, you know, your selling point. That's the last question. Thanks.
Yes. In general, what we are seeing, and we're meeting also some other telco providers, several of them did an agreement with Microsoft or Google or whoever. The real result in terms of, let me say, sales has been very poor. The other game is, from my point of view, it doesn't make any sense to have a super big announcement with Microsoft or other player. The topic is the clients are already into the hyperscaler.
Yes.
They're looking for other options in order for.
Hybrid.
Yes. For more hybrid. They're more concerned with finding players with the capability to host large infrastructure and relevant footprint in terms of microservices. From my point of view, out of the telecom, Microsoft, the topic is you need to have a reliable and a real-world references cloud-native platform. There's no reason to move into the hyperscaler to find a solution to the service that you don't have in your footprint. At least for Wiit, is a priority to have a full set of services in every single direction. That means AI platform, cybersecurity, cloud-native, Broadcom, non-Broadcom. So to give a real chance to the clients to move outside and to rebalance the existing superpower of the hyperscaler. Hyperscalers are currently more than 70% of the European market.
8.
That means that there's no reason to empower that part as well. Clients are looking for options, for different options, not for enlarging this kind of powerful.
Thank you.
Next question is from Marco Vitale, Mediobanca.
Thank you. Good afternoon. Just a follow-up on the Q4 performance. From my estimate, the profitability in the, say, in the German market was a little bit softer compared to the performance recorded in the prior quarter in Q3. While this was part offset by very strong and ongoing profitability for your domestic market, that should have reached around 55% in Q4. I was wondering if you could add a few comments on that and whether you see the current profitability level in Italy as sustainable also going forward. Thank you.
Yes. I think profitability in Italy is really sustainable. At the end, we expect to increase the EBITDA margin for the current year because the effect of the reduction of the CapEx will be more visible in the next two years. I expect to have less amortizing from EUR 1.5 million yearly and more in 2027. In Germany is stable Q4. Consider that the single quarter doesn't make sense to analyze single quarter, but we had effect of one credit note issue at the end of this year because one client have discount. This is based on the network traffic.
For this reason, Q4 in Germany is stable, that is stable, but is only effect of one account from effect to discount account only Q4 and not in the full year. In general, what we anticipate, Germany compensates fully the churn and the effect, the net booking was positive. That means, we expect slower growth in Germany for 2026 and more consistent growth in Italy. The pipeline now in Italy is recovering, is fully recovered because consider that last year we also not so high value pipeline. Now, in fact, plus what Enrico anticipates in terms of data sovereignty and new clients are probably coming in the next quarters. That means it's very, very sustainable. We need more EBIT because the capacity we have, we can double our revenue without expansion CapEx.
We need only to invest in servers, storage, and software on the deal, the single deal, and we have capacity.
Understood. Thank you.
Next question is from Giorgio Tavolini, Intermonte.
Hi. Just a follow-up on your 2026 expectation. Excluding the German sale and leaseback, I mean, on the current perimeter, consensus expectation are south of EUR 180 million. Should we expect EUR 3 million less related to the German remaining impact on the churn? The adjusted EBITDA is around 40% margin. I see cash CapEx in the region of EUR 25 million. Now I don't know if it's better to assume something lower or flattish compared to 2025, so EUR 24 million or even less. Thank you.
Currently, we confirm the market expectation about EUR 182 million and EUR 73 million EBIT. We don't have now the visibility to understand the CapEx we need to do for the Broadcom consolidation. If you don't consider the Broadcom consolidation, EUR 34 million cash CapEx is totally in line with our budget. Naturally, if you have an opportunity to consolidate with more partnership, probably we increase little bit the CapEx because we have more revenue and still. Based on the current business plan, EUR 34 million cash CapEx is in line and EUR 73 million EBITDA is our the consensus is from our point of view is achievable. Starting from EUR 67 million over the last year, consider that we have the full effect of the contract activated the last quarter, plus the organic growth.
Okay. It should
It's conservative. It's conservative, but achievable.
Next question is from Domenico Ghilotti, Equita.
A follow-up. Still a very small market, but I was interested in having your comments on Switzerland.
Switzerland is a huge opportunity because it's small in terms of number of people who live there, but it's also small in terms of size of the cloud market. It's roughly similar to Spain. It's a big market because it's very restricted, very regulated. The problem we have is in Switzerland now we need to increase the size of the company. We need to achieve EUR 30 million of ARR. For this reason, M&A could be probably the main option we have on the table to accelerate our growth. Because organically we are growing. Last year we closed EUR 1 million gross sales. We expect to do this year EUR 2 million, but it's too slow. EUR 2 million yearly, we need 10 years to achieve the correct size. With M&A, we want to accelerate.
We have fortunately target because in Switzerland, Broadcom, the same effect. We remain five companies, Switzerland, and a lot of small providers are out of the program and need to find a solution. We are in discussion not only Germany, France, Italy. Actually, Switzerland we have a current discussion. M&A probably is the best option we have to accelerate our growth. We need EUR 30 million of ARR to be consistent in the market.
Also for the sovereignty point of view, in the last three months, because considering in 2025, Switzerland, there has been a rising topic on having a hyperscaler with resident data there. It seems that for also for the banking, the collaboration tools, for example, could have been shifted to the hyperscaler. In the last three months, there has been a really high level of criticism coming from different players. They and the Swiss government changed the direction, and then there has been a very hard slowdown into the potential shift to the hyperscaler. That brings back again into the sovereignty topic for Switzerland as a major concern.
Okay. In terms of, let's say, ability to upsell and also consolidation of your customer base, should we assume that now your customer base is. We should not expect a churn, but just maybe a cleanup of the non-core, non-RR-
Yeah
RR revenues?
Correct. We have additional 6-7 million of non-core hardware sales and project. We want to clean up this part of revenue. We want to grow the, you know, from EUR 12 million is our ARR to, I hope, 20 shortly, and the target will be 30 in the midterm.
Okay.
Because the cost of the product, the salary is very, very high. Considering in Switzerland we have CHF 8 million cost of salary with EUR 12 million revenue. It's double compared to the German. We need to have more size. We have capacity because the company acquired was around 20 million revenue when before the acquisition. They have a lot of churn. Now the situation is very, very stable. The clients are still on board. We don't have a churn in the last six months. We want to restart growth, but the company need eight or nine million more revenue to return back profitable. Seriously profitable. Now it's 12% is very low for our point of view. 30%-35% is the target.
Very clear. Thank you.
Next question is from Giovanni Salvetti, Berenberg.
Hello. A follow-up on my side, too. The first one is more like, did you say strategic? I was wondering if you were considering also selling Geco to finance a future M&A. In terms of maybe multiples that you would pay, if these providers that are excluded from the Broadcom program are anyway for sellers, what kind of multiples should we think in terms of, you know, M&A?
Oh, Geco is not on the table. It's a profitable company. It's running 23% EBIT margin, and with good customer base, and we share some clients in the cloud business. It's not on the table to sell Geco. It's profitable. In any case, the current market price, the consulting company is trading at 5-6x EBITDA. It's not the timing. It's not on the table. In any case, the price, you know. About M&A, it's correct what you mentioned, that multiples are decreasing. We are now starting to discuss multiples from 6x to 8x the EBITDA before synergy.
The trend, I think, is decreasing in the following quarters because when you arrive close to the end of the contract, you are forced to sell the company. Currently, the request arrive now is 5x-8x, the bigger one. Compared to still when the request was 10x-12x, now the point is 5x-8x. What I suppose is in the next quarters could be option to put to additional decreasing for the request for the seller. From the point of view, 5x-6x before synergy is a good deal. Consider we have a lot of synergy in terms of percent, operation.
My point was more about if you're forced to sell in a way, it's maybe too brutal to say that, but you can squeeze as much as you want, right? In terms of the multiples you pay. Anyway, this is very clear.
It depends. Every single target is different story, you know. Because I told you we want bigger part, we want bigger revenue, and this part is very residual. Or others are only this business. Every single target of a single
Yes, I did.
Day by day. There is not one single story. Depends.
For any further questions, please press star and one on your telephone. Mr. Cozzi, there are no more questions registered at this time.
Okay. Well, thanks all for joining the conference. See you soon at the next conference for the Q1 results in April. Okay, thank you. Bye. Have a good rest of the day.