Growens SpA

MIL:GROW

Earnings Call Transcript 2023-Q1

[Micaela Capelli, executive]

Good morning, everyone, and welcome to our Q1 conference call comment. As for today, we have Mr. Monfredini, our Founder and Chairperson; as well as Mr. Gorni, our Founder and CEO, to comment on the latest results, which we released earlier this week. We will start by commenting Q1 P&L and net financial position. This session is being recorded, and it will be available as usual for the records on our website. [Operator Instructions]

So I will leave it to Mr. Monfredini. Thank you, Matteo, and thank you so much for attending.

[Matteo Monfredini, executive]

Thank you, Micaela. Good morning. Good morning to everyone. Thanks for being here. Today, I'm going to show you 2023 first quarter results in terms of profit and loss and net financial position.

Starting with the slide of profit and loss. You can see that Q1 posted total revenues for EUR 24.2 million with an increase of 14% compared with the first quarter of the previous year. The increase in absolute value was more or less EUR 3 million and was mainly driven by the 39% growth of SaaS business line with an incidence of 42% of revenues.

CPaaS is a business line, is stable with 0.3% of growth and an incidence on total revenues of 57%. Consolidated recurring revenues, that means SaaS subscription, representing 30% of total revenues at EUR 7.2 million, growing by 23% versus the same period of the previous year. While foreign revenues amount to EUR 15.2 million, representing 63% of total revenues and growing by 14%, in line with the figure of the revenues.

If we look in details at the business unit on the right of the slide, we can see that the new business unit resulting from the merger of MailUp and Contactlab grew by 56.5% or plus EUR 2.4 million. This growth is mainly related to the acquisition of Contactlab that was not present in 2022. The merger has been successful in terms of organizational structure, but has not yet started the performance in terms of cost optimization and revenue growth. In the meantime, MailUp monthly recurring revenues have started to grow from March, thanks to the investment in sales and marketing implemented last year.

The Agile Telecom business unit posted the biggest revenue of about EUR 14.9 million, growing of 1.3% over the same period of the previous year. The growth has not been exciting as last year. But as you know, the main focus of Agile is on profitability, profitability growth in the Q3. Seems -- the Q1, sorry. That seems to be in a positive direction with an increase of 15.6% compared to the first quarter of the previous year.

The fastest organically growing business unit was BEE with a 25% increase and EUR 2.4 million revenues -- additional revenues, driven by increasing volumes. Annual recurring revenues, it was to -- about EUR 10 million. That means USD 11 million as of March 2023. And so we are growing also in that term of annual recurring revenue.

Acumba performance is also excellent, growing by 14% compared to the first quarter of the previous year. Typically, Acumba growth is lower in the first quarter of the year for seasonally -- seasonality reason.

Datatrics is [indiscernible], has generated EUR 0.6 million of revenues, decreasing by 11% compared with the first quarter of the previous year. The business unit, unfortunately, has not yet started to grow, notwithstanding the investment of the previous year, but we are confident of the capabilities and scale of the new CEO, Harm Jansen, that started his new position at the beginning of the year and [ has time to perform. ]

Going forward, with the consolidated profit and loss, we can see that the consolidated EBITDA amounting to EUR 0.8 million -- EUR 0.8 million and decreased -- has decreased by 27% versus the Q1 2022 with a 3% incidence of revenues. The absolute relative decrease of EBITDA margin is due to accelerating investment in research and development with an increase of plus 65%, of which OpEx, operating costs, 27%, in lieu of the development as well as the incidence of general admin cost with an increase of plus 49%, largely due to advisory and execution cost for sale of the e-mail service provider business. The consolidation of [ total cost ] not included in that Q1 2022 and additional effect of the change in [indiscernible] system on staff expenses.

On the other side, gross profit grows by over 24% to EUR 7.8 million with a 32% incidence margin in our revenues. Whereas earnings before taxes is negative for EUR 0.8 million due to the decrease of EBITDA margin and the increase of amortization cost especially in resource and development due to the increase of investment to BEE, as I said before, and the acquisition of Contactlab.

The consolidated net financial position, I move on the correct slide. Okay. The consolidated net financial position as of 31st March 2023, amount to about EUR 1.1 million [indiscernible] decreasing versus the previous year's recorded net cash amount of EUR 65,000 as of 31st December 2022, mainly due for some cash out, of which firstly the anticipated settlement of Contactlab amount, the first installment, partial to the sale of e-mail service provider business financed with a short-term loan facility. And the second reason is related to the indirect cash pooling policies, relying on Agile Telecom facilities. Figurative debt from IFRS 16 adoption amounted to EUR 2.3 million. Cash amounted to EUR 7.6 million, growing by 6%.

On my side, [indiscernible], if you want to comment something?

[Nazzareno Gorni, executive]

Yes. Thank you, Matteo. So of course, the numbers in the second part of the year will be completely different after the closing of the transaction that we announced in February. So the sale of Acumbamail, MailUp and Contactlab. So at that time, we will have a complete picture of the new group after this transaction.

The second point I want to highlight is that we are working, of course, in drafting the 3-year plan of BEE, the U.S. business unit, in order to be able to accelerate its growth in the next few years. And on the other side, we are also working on Datatrics, the smallest business units in our group, where basically, we appointed a new CEO in January, Harm Jansen. And he's taking some initiatives in order to, let's say, complete the turnaround we started in the past.

In terms of M&A, the strategy remains opportunistic both on the sales side and on the buy side. On the buy side, of course, we will focus on acquisition that can have synergies with the BEE business unit, which means basically to accelerate and strengthen the go-to-market, and on the other side, to speed up the R&D development. So we are looking at companies both small, small startups, but also midsized companies mainly in Europe and in the U.S.

No other company. Are there any questions, Micaela?

[Micaela Capelli, executive]

Yes. There's the first one. And thank you very much for your presentations, gentlemen, so far.

Could you please provide some color on BEE's ARR and other KPIs trend today, at least in qualitative terms? So I will leave this comment to Nazzareno. But first of all, let me just anticipate that year-on-year growth of BEE's ARR as of March is a faithful representation of its relative growth, whereas quarter-on-quarter growth might be slightly better than what it appears because there were a few restatements among figures that were first accounted for in December's 2022's ARRs and March's. So that might be a slight difference that becomes evident in the future. And the trend is actually that it's growing faster than it appears due to some reclassifications of certain figures, which do not change the overall appearance of BEE's growth part.

So I would now leave this to Nazzareno to comment in more detail BEE's KPIs. Thank you.

[Nazzareno Gorni, executive]

Yes. This is the press release of the Q1 2023 results. As Micaela said, there are as this effect. On top of that growth, anyway, is not as fast as in the past, mainly because we also changed our pricing model and we introduced the freemium edition more or less 1 year ago. And this brought a larger, much larger number of users, free users. They are growing really nicely. But on the other side, the number of paying users is not growing at the same pace basically. So now we are working with the BEE team in order to increase the commercial rate from free to paid because probably we were too generous in defining the specifics of the free edition. So now we will tighten some options and features in order to increase the conversion rates of the number of paying users. And those actions will require several months because it's quite a complicated topic that involves R&D, sales and marketing.

The other KPIs regarding BEE, well, the gross margin is almost stable. EBITDA margin is not meaningful since we are investing and we will invest more in the coming months. In terms of revenue retention, it's decreased. It was over 100%. Now it's below 100%. This is related to the reasons that I explained before. So having less expansion and less conversion from free to pay basically means that the expansion is lower. So the net retention is lower.

On this regard, we are also working on a new pricing, which means that we will review not only the free package, but also the team and the enterprise packages in order to basically increase the average revenue per customer and expansion. So that's the main activities that -- where we are working on.

Apart from that, of course, in terms of R&D, BEE is working a lot, developing new staff. This last month, we released the beta version of ChatGPT integrated within BEE, which means basically the engine of OpenAI now is available within the BEE visual builder, which means that basically, while you edit and create a new design, you are able to speed up the process, asking ChatGPT to provide content, to review content and to translate content.

So at the moment, it's still the first -- very first release, but the first feedbacks are very good. And in the future, this feature is also a new revenue stream because it will be free upon a certain threshold. And after that threshold, we will charge our customers to use this feature. Any other questions? We can't hear you, Micaela.

[Micaela Capelli, executive]

Sorry about that. Can you hear me now?

[Nazzareno Gorni, executive]

Yes.

[Micaela Capelli, executive]

Sure. So there's another question which I might take concerning the verification of certain conditions precedent to the closing of the sale of the e-mail service provider business [ team ] system. In detail, they refer to getting the appropriate govern authorizations from the Golden Power point of view and from the antitrust point of view, both in Italy and in Spain.

I would say that, of course, we passed the resolution with Growens' ordinary and extraordinary general shareholders' meeting, and that was verified as of March. As per the Golden Power and antitrust, we do not have any formal confirmations yet. Although we are very confident that this is going to happen. And of course, when this is happening, there will be the subject of a dedicated price-sensitive press release. And we really trust that it won't take any time from now. But as soon as we got the authorizations, we will be obliged to disseminate the appropriate information to the market. So rest assured that you all will know when the commission's [ precedence ] are all verified.

On top of that, the biggest and more substantial condition that it's still a work in process because, of course, it's the most complicated part, is the corporate reorganization, which is functional to the closing, which concerns the contribution of the MailUp business, which is being spun off from the Growens holding company, to be contributed into Contactlab, which eventually will change its legal name from Contactlab to MailUp. This has not happened yet. And so there will be appropriate communications when all those conditions are appropriately verified.

I would then switch to a -- for the question. Well, there are a couple of questions which I might take as well concerning the stock trading stock price and market trading on the stock exchange as per those days. The actual question was whether we are satisfied or not about the current trading.

Let me answer like this. So far, there is no point in being satisfied or dissatisfied about stock trend. The market is what it is, and we take the message that there might be some uncertainties yet to discount on a full evaluation, which we do not believe is currently appropriately reflected on the market cap. There's no point in being dissatisfied with the market because we really share the conviction that we do our best and there have been complaints that we either spend too much or too little in Investor Relations, communications, brokerage and stuff. The point is that we are not able, not willing to influence the market in -- apart from what is right to do. And the best way we can protect everybody's interest is to keep delivering, keep executing, keep protecting the business and keep executing things that might increase the actual industrial value of Growens and its subsequent businesses.

Anything you would like to add, either Nazzareno or Matteo?

[Nazzareno Gorni, executive]

Yes. We can also highlight that anyway, the liquidity is much better than the last year. So that's a good point.

[Micaela Capelli, executive]

Sure. And I would say we see pretty good volumes that do not make it impossible to build good positions. And we've had several shareholders, very important Italian funds that attended General Shareholders' Meeting. And I mean, marketwise, I think that's really as much as we could afford to do so far. And please, everybody, rest assured that we'll be taking care of any potential action that's available for us, besides, of course, focusing on execution and delivering some business results.

Are there any other questions? I don't see any other within the chat or was in the -- within the IR e-mail account. In any case, everybody knows that we're always available to go in depth and deep dive into any topic you would like to face with us as long as it's, of course, concerns publicly available information. And if there's no more questions so far, I would thank everybody for participating. Thank you, Matteo, and thank you, Nazzareno, for commenting results with us today.

There is a further question. Is there any plan to bring BEE public on the Nasdaq?

[Nazzareno Gorni, executive]

I believe that BEE today is too small to list on the Nasdaq with EUR 10 million revenues, more or less. So for sure, in the future, when the size will be enough, we will evaluate this opportunity. But at the moment, there are no plans, no projects in that regard.

[Micaela Capelli, executive]

Yes. Well, thank you very much, Nazzareno. I would add exactly by -- something -- pointing out that there is no actual plan or intention. Although we know our options, we keep researching in order to deliver the best options when the business is ready, when everybody is ready. So we keep gathering information, and we know what it's all about, but there's no decision made about that, of course.

Any other questions? So I don't see any other. And again, thank you, everybody, for attending today.

[Nazzareno Gorni, executive]

Thank you. Have a nice day.

[Matteo Monfredini, executive]

Thank you. Bye-bye.

[Micaela Capelli, executive]

Goodbye. Thanks.