Asseco Poland SA

WSE:ACP

Earnings Call Analysis

Strong First Quarter Performance for Asseco Group in 2024

Asseco Group reported robust performance in Q1 2024 with sales revenue of PLN 4.25 billion and a 14% rise in non-IFRS operating profit to PLN 501 million. Net profit increased by 16% to PLN 125 million. The group's diverse operations aided in stability, despite notable currency exchange impacts. Asseco Poland achieved an 11% sales growth, while Asseco International and Formula Systems faced slight declines due to currency fluctuations, though they demonstrated underlying growth in original currencies. The group remains optimistic about benefiting from upcoming EU funds and continues to focus on long-term profitability improvements.

Asseco Group's Strong Start to 2024

The Asseco Group kicked off 2024 with impressive financial results, showcasing resilience despite a challenging global environment. For Q1, the Group reported revenues of PLN 4.25 billion, a robust increase driven by strong performances across various sectors, especially in finance and public institutions. The comparable non-IFRS operating profit reached PLN 501 million, reflecting a 14% rise, while net profit surged by 16% to PLN 125 million.

Currency Impact on Performance

An important factor affecting the Group's performance was the impact of currency fluctuations. With around 90% of revenues stemming from foreign operations, a noticeable strengthening of the Polish zloty against the euro and the dollar was registered—8% and 10% respectively. This exacerbated the financial outcomes, as without these currency impacts, revenue growth would have been close to 8% and EBITDA would have seen a 9% increase, suggesting even more dynamic growth.

Segmented Revenue Insights

In terms of operational segments, Asseco Poland achieved an impressive 11% growth, attributed to stable demand in banking and finance sectors. Conversely, Asseco International experienced a slight 3% decrease in sales, but when adjusted for currency changes, it would have shown a robust 5% increase. Formula Systems, the largest contributor to the Group's income, reported a 4% decrease in revenues, which would have approximated a 9% increase without currency effects.

Looking Forward: Backlog and Expectations

Looking ahead, the Group's backlog is growing steadily, up 7% overall with Asseco Poland leading at a 10% increase. Nevertheless, the management acknowledges the potential for variances in project acceptance and execution, particularly in the public sector. They assure stakeholders that they are well-positioned to capitalize on anticipated EU funds dedicated to innovation and technology, which they believe will bolster their orders significantly in the coming years.

Challenges and Strategic Moves

The Q1 results also highlighted operational challenges, particularly related to high interest rates and inflation impacting costs. Management detailed ongoing negotiations to acquire three companies in Poland, potentially adding new competencies but remaining cautious about pricing amid competitive pressures. They are committed to ensuring acquisitions contribute positively to the Group without incurring excessive costs.

Guidance on Margins and Future Performance

While providing a concrete EBIT margin forecast for 2024 proved challenging due to numerous influencing factors, the management expressed its core aim of improving profitability through efficient resource use. They emphasized that Q1 performance could serve as an essential benchmark as they work towards enhancing operational margins over the full year.

Earnings Call Transcript 2024-Q1

[Artur Wiza, executive]

[Interpreted] Good morning, ladies and gentlemen. We welcome you very warmly on the meeting devoted to the financial results of Asseco Group in the first quarter of 2024. We are very sorry for a slight delay. We've had technical problems. We welcome you to the meeting. Traditionally, our meeting is going to be divided into 2 parts. In the first part, we are going to present you with our activities and the financial results. In the second part, we are going to answer your questions.

Right now and today in the conference, we have traditionally, Karolina Rzonca-Bajorek, CFO of the Group and the Vice President of Board of Asseco Poland; and Marek Panek, Vice President of Board. We are going to begin with presentation of Karolina. I'm sorry, I'm going to begin with Marek.

[Marek Panek, executive]

[Interpreted] Yes, excuse me, I'm going to begin. As I always do, I want to welcome you very warmly. And I'm very happy that we are coming here with smiles on our faces and we have reasons to smile because the first quarter of 2024 has been a very good time for the whole Asseco Group, both financially and from the business point of view. All the sectors or the segments where we operate had a very successful period in the first quarter of 2024.

We are very happy, especially in the context of operating in such hard to predict business environment. We know what's happening in Ukraine, in the neighboring countries such as Ukraine, in Slovakia. Here, I also mean war in Israel. It is not helping and brings a long business risk. I'm very happy that we've begun the current year in such a good manner.

We can see here the basic parameters of our results, revenue sales on the level of PLN 4.25 billion and then comparable non-IFRS operating profit of PLN 501 million, an increase of non-IFRS profit by 14% and net profit by 16%, equaling PLN 125 million.

Here, I want to draw your attention to the first line which is a very significant impact of the differences of the exchange. We've shown it after the first quarter we've been always monitoring our business in the original conditions. Please remember that around 90% of revenue of Asseco Group come from our foreign companies. Those are incomes in different currencies than Polish currency. So we have to convert it. In the quarter, just like in the previous quarters, lately, the differences in the currencies were very much noticeable. If not this factor, we would have had 8% growth of revenue and EBITDA growth of 9%, which is even more dynamic.

This all makes us very happy with the financial results. I think this is a consequence of what we've been doing for the last 30 years that we are very well diverse when it comes to the project, sector, products, and our business is based on very healthy stable foundations that we have constructed on our own programs and on our own services.

There are certain hopes for maybe not this year, but the next year to come for sure. There are hopes of European Union funds that are arrived -- have arrived to Poland and will be in the institutions, which will be applying for the funds in order to implement that project. Of course, those are processes, there will be tenders, public procurements, and we will be taking part in all of those and being a company with all the 30 years of experience and the history, which shows that we are able to efficiently implement projects timely.

I believe we are going to be a very important beneficiary of all those funds that have been transferred to Poland. Traditionally, I want to summarize business activities of our Group. Let me begin with what was happening in the geographic segments. Let me begin with Asseco Poland segment.

Here, we've noted 11% of growth of sales. Here, there are no results of currency differences. There were no acquisitions in the segment in the last quarter. So we are happy that we have such a healthy business. I want to pay attention to a very dynamic growth of revenue in finance and in public institutions. I will elaborate on that later on when discussing particular sectors of our operations.

Then the Asseco International segment. Here, we can see 3% decrease of sales, but please let's remember the differences in currencies. If not the differences between the currencies and if we would be looking at Euro, Asseco International was growing by 5%, which is a very good result. We want to underline the very good situation in Asseco South Eastern Europe and in our segment of Asseco Enterprise Solutions.

And Formula Systems segment, here, let's remember that we have -- and this is the biggest contributor to the income of the group, and it brings around 66% of income. Here, we can see 4% decrease. In original currencies, it would have been 9% of growth.

This is something we need to bear in mind when assessing the business of this part of Asseco Group. We are underlining Matrix in here, the biggest Israel company, which had the best quarter ever. Of course, in the original currency of reporting, meaning Israelian currency.

And here, we are very happy with what's happening in Sapiens. It's been a very good quarter for Sapiens, especially in the main markets where it's operating in Europe and in North America. Here, you can see a slide, which will be explained by Karolina because she is the mother of change in the new approach when it comes to shift to our new approach to sales.

[Karolina Rzonca-Bajorek, executive]

[Interpreted] Yes. So we wanted to show you a remapping of our income. On the last year's conference at the end of the year, we said that we will be changing the way we present our income and also our results. Here, we are showing you what would happen if the income of first quarter 2023 would have been showed in the new manner.

So this is a remapping of comparable data. On the next slide, we will have this approach on the right hand of the table. What is the change based on? We've explained it partially on the conference at the end of the year. Up till now, we've been presenting you with income in the division looking at the end customer. It was less important what we are selling. What was more important is who we are selling it to. So we've divided the income into the sector of banking and finance, public institutions and general business.

What we've done right now is that we have separated product groups. And this is how we are looking at what we are selling. It's important the change of volume is based on the fact that in the income from finance or public institutions or RP solutions and other IT solutions will not find income from infrastructure. So wherever we have projects, which generates income partially on sales of infrastructure, this is the income which is separated to a separate line.

This will -- should at least help you in building models or in tracing rentability because obviously, we can draw conclusions that the goal of Asseco is to earn and generate margin on sales of own solutions. But the activities in relation to selling infrastructure is a complementary activity. So we cannot fully resign on that. And part of the projects, this infrastructure is crucial but the margin of the stream of income is, of course, different.

Another change is that to the public institutions, we've added solutions which we call utilities in the slide. This is mainly energy sector, which is fixed price project based. And the nature of those projects is very close to what we are selling to other institutions -- to our public institutions. This is why we've found that logical to change it in such a way.

The ERP solutions, it's pretty obvious what's there. When it comes to other IT solutions, from important things from Polish market, what's important that has not fitted in the other categories. It's mainly telecommunication or solutions in the scope of trust services such as e-signature.

[Artur Wiza, executive]

[Interpreted] I understand that this is it when it comes to your comments. Thank you very much, Karolina. I think that this what benefit to everyone. And we hope that you will be able to understand our business better. That you will be able to build your own models better. Let's get used to this, and we will be learning it jointly together. Should you have any questions related to the new approach. Go ahead, we will be at your disposal.

Right now, let's continue my part of presentation. I want to show you a slide, which shows the division of revenues by new product groups. Here, a word of comment from me. You can see that the biggest part of revenue are the solutions for finance. Here, we have banking, insurance, leasing companies and everything that is under the finance.

It is limited to own software and own services, excluding infrastructure. On the second position, we have the infrastructure and activities, which are not our favorite to say the least. We are still doing it for different reasons. It constitutes 24% of the whole revenue of our group. And the third place, we have solutions for public institutions. This is around 20% of income. And on the fourth place, we have probably the other solutions -- other IT solutions and ERP 9%.

We underline our diversification when it comes to the client groups, we are not dependent on a particular client. The top 10 of clients of the whole group constitutes for 11% of our income. And the share of the largest customer of our group is around 2% of the whole income of the whole group.

Let's continue. Right now, the solutions for finance. I will discuss separate product groups that I've mentioned. So let's begin with finance sector. You can see in the whole group, we have PLN 1.320 billion of income. This is a very similar income to the income from the last year. Here, we are showing it in the changing currencies. But in the original currencies, the numbers would be bigger. In the Asseco Poland segment, we have almost 20% of growth. This is related to our activity in the sector -- in the banking sector in Poland. And it's related to the fact that we have a very stable big group of clients.

We have a very healthy wide stream of income from maintenance, from the development, from maintaining our systems. And additionally, we are implementing 3 big projects of implementing core systems in banking sector. Additionally, we have leasing finances from the systems where our activity is growing even faster. It's around 25%, if I remember quarter-by-quarter, but this is a much lower -- smaller scale compared to the banking sector.

Asseco International, here it's flat. But in the original currency, there would be around plus 4%, plus 5%. Here, we have sales in the level of around PLN 340 million. This is mainly Asseco Southeastern Europe. Here, the growth was most dynamic, both in the payment sector and in the sector of core solutions and omnichannel for banking sector.

And last but not least, Formula Systems, almost PLN 847 million income. Here, the biggest player in the sector is Sapiens. As I said, we are happy because Sapiens is managing very well. In all the markets, I want to remind you that Sapiens is a global company and the income comes in 90% from outside of Israel: 50% is Europe, 40% U.S.A. and those are the markets where Sapiens is mainly developing and operating.

The next group of our solutions are solutions for public institutions. Here, we have PLN 820 million of income in the whole of group similar to the last year. In Poland, we have 9% growth of sales. This is a very good result. Of course, those are solutions for administration, central and local government, but also health care sector where we've had a very good quarter.

In public, we've been implementing for years, long-term projects. We are tied with contracts with very big institutions. We've mentioned here in the slide, several of them, just to give you examples. And we keep on signing new contracts because in the current reporting time, we've been signing new contracts. And the forecast related to the funds from the KPO, we are very optimistic for the future.

When it comes to Asseco International, we are happy with the 3% growth of sale in the original currencies. It would be even more growth, especially, as you probably remember, that we've been registering certain stagnation on the Czech and Slovak markets in the last year. So 3% growth is a very good forecast for the future.

And Formula Systems around PLN 486 million of sale in the original currencies. It's [ several ] percent of growth. And here, the biggest players in the segment are Matrix and Magic, which are implementing projects for public and for health care, that is in this group of products. I'm sorry, our ERP solutions. Here we have PLN 372 million of sales in the whole group, 1% growth.

Please don't worry about Poland. You can see 5% decrease, but this is a very small scale. Here, in the group, we only have DahliaMatic company, which is operating in Poland and has been implementing ERP solutions of the first parties such as Oracle, Microsoft and SAP. This is the scale -- as you see in the first quarter was around PLN 16 million.

In Asseco International, we have our ERP solutions. So everything that is under the Asseco Enterprise solutions. Here, we are happy to note growth in the sale is PLN 225 million. Last but not least, Formula Systems here smaller scales, PLN 132 million. Here, the biggest player is Matrix. Just to remind you, Matrix has an own system named Tafnit, that's ERP system, and they also have a business unit, part to it, which is also in charge of ERP solutions for the third companies.

This all equals to this amount of money and the remaining ERP solutions. Other IT solutions considered 8% growth in Poland. Poland, as Karolina mentioned, that is mostly the IT sector and telecoms. We are very happy because telecoms -- this is a project that we implement for Polsat Plus. Let us not worry about Asseco International because the scale is very small, PLN 23 million. However, this is the result of a high base at the end of last year, where we concluded a large-scale dedicated product. And then PLN 640 million Formula Systems segments, this is Matrix and Magic in Matrix. These are dedicated enterprise solutions that are not really typical ERPs and Magic that, first of all, manufactures and sells the developments for mobile application platforms and then there's outsourcing of resources in the U.S. mostly. That is it from my part. Now I give the floor to Karolina.

[Karolina Rzonca-Bajorek, executive]

[Interpreted] Thank you. Let us have a look at our performance in quarter 1. This is the bird's eye view for the time being, as Marek mentioned, PLN 4.25 billion sales revenues, and we can see CAGR 10% proprietary software; and services, PLN 3.298 billion; non-IFRS EBITDA, PLN 645 million; and non-IFRS EBIT, PLN 501 million; and non-IFRS net profit, PLN 137 million, that's again 10% of CAGR.

Non-IFRS results quarter 1 2024 versus quarter 1 2023. This is our bridge, so to speak, to what we report this year. We can see the substantial influence -- negative influence of currency exchange rate. Quarter 2 quarter Polish zloty became strong both against euro and dollar, 8% and 10%, respectively, if I remember correctly. However, the strengthening is substantial because that means over minus PLN 432 million.

Organic growth that is organically generated [indiscernible] and then we have a substantial top line profit as well. Non-IFRS operating profit. Well, looking at Q1 2023, that's PLN -36 million and this is the currency exchange rate negative influence forEx rates. Plus PLN 14 million sales of property in [indiscernible] that real estate was classified for sales some time ago. However, from the operations point of view, it generated costs because our employees already provided services from the office in a different building. So there should also be a long-term result regarding savings in sales.

The sale also gave us plus PLN 14 million. Nearly PLN 22 million these are organic results, PLN 8 million from acquisitions, and all of that translates into over PLN 0.5 billion non-IFRS EBIT. Non-IFRS results. This is net profit non-IFRS looking at 2023, well we can see the difference. We had to buy back loan. This loan generates about PLN 60 million annually because of the interest rates. We can see that presented here and nearly PLN 16 million negative on loan interest.

Then we also have sales of property, PLN 11 million and nearly PLN 21 million. This is an organic result in the group and that translates into PLN 130 million -- nearly PLN 37 million net profit in quarter 1 2024.

Profit and loss, P&L. On the right, we can see the growth. This is excluding foreign exchange. We are very happy to see growth in -- all of the stable results. We can see also the operating profit. We can see the growth in also EBITDA. But of course, we have to take into consideration what is happening in Asseco Poland. However, we can see that the profitability when we take off that influence, that's 11.5%, and that is a good forecast for the future.

What is happening below EBIT then, of course, we have got the interest rate that is more burden than in quarter 1 last year. We have got also a good situation in M&A transactions. However, hyperinflation that also has an influence over us. However, we can take it off at some point as well. Gross profit tax. We can see that we have taken what can be written off from taxes as well. So tax deductibles and then effective tax rate share of profit loss of associates. And this is when we look at PLN 125 million for quarter 1 2024 as net profit attributable to shareholders of the parent company.

We can see that these numbers are comparable, minus PLN 15 million because of the ForEx and plus PLN 15 million on EBIT and plus PLN 11 million from the real estate. We could say that the numbers compensate each other. So we can compare this PLN 125 million to PLN 107 million.

Looking at respective companies. What makes us especially happy is that in the companies where we consolidate more percentage-wise on the bottom line, they grow better. So this is when we look at Asseco Poland, the parent company. We have got also very good results -- also very good results in Asseco Data System, PLN 5 million EBIT from other companies.

And Matrix and Formula Systems segment, a very good quarter, also a very good result across the board. Magic Software, less of the growth. We lost a major client in the States. We also have fewer employees in the company. This is why the organic results are weaker also in U.S. dollars. However, in general, the company is growing, and we can say that for Sapiens, that was a good build as well.

Asseco International segment, a good result in ERP in Poland and in Germany. The situation in public -- the Czech Republic is stabilizing. We are especially happy with a large project that generated losses last year. So we are happy to be in that moment in time that losses will no longer be generated this year, and we are not going to see them in the financial results for this year. We will see how the situation evolves.

Slovakia. Well, as Marek mentioned, it seemed that the situation was stable regarding public. However, we need to wait and see how the operations evolve. I would say that there isn't a major issue regarding project delivery. However, we know that the project needs to be accepted by the client. That means that we may have new terms and conditions and also an unstable political situation also gives us some question marks, Central and Eastern Europe.

Asseco, we can see that impairments are very good, mostly driven by e-commerce, good results in banking, omnichannel solutions being the majority. However, dedicated solutions, the results are not as good but we believe that there is nothing to worry about and our bulk companies are growing.

So Asseco PST, very good results. We can see that Asseco PST and Polish banking, this corporation is growing. The first offers are being submitted. I believe that this is good news as well. Cash generated cash flow for quarter 1 compared with the previous quarter, that means quarter 1 2023, we have got better results, 121% of cash conversion ratio at the level of the whole group, above 100% in each segment.

If you wanted to look at it in more details, especially when it comes to the parent company, as those numbers are reported separately. We can see that compared to the end of last year, the result is slightly less favorable. However, this is our natural cycle of cash collection. I presume that Q2 is going to be the moment that where we are going to invoice for subjects that are being now submitted as offers and the cash will come in quarter 3 that we have stable liquidity situation. In the parent company alone, we have got over PLN 300 million at this point, the whole segment PLN 380 million and we can see substantial amounts in other segments as well.

Asseco International holds the cash as usual. And then the liquidity situation, of course, is influenced by the loans that have been taken. However, the loans are being serviced appropriately, as I have mentioned, without any disturbance. Our disclosures after the end of the year, this is the proportional approach. This is what we also offer in our report. We can look at the numbers if we were to multiply every level that results by a percentage of ownership but by respective companies.

So we can see that profitability of the group is even better. This is the result of the fact that the companies where we have a larger share, they grow faster. So they have a better profitability. Historically, it was Asseco Poland than Asseco International and Formula Systems usually came third.

This is where we also excluded ForEx exchange, so exchange rate differences. So when that is included, we can see size revenues growth, 9%; non-IFRS operating profit, plus 19%; and operating profit, plus 23%. Liquidity position proportional view and Asseco Poland, we can see that the numbers do not really change that much, practically stopped 100% across the board and Asseco International and Formula Systems are now shown here multiplied by effective percentage.

Now the group's backlog. This is our portfolio that is being developed for years now, probably for 2 or more years, we have been showing our portfolio in 2 respects: fixed rates and variable rates. We can see what it looks like across the year and we would say fixed rate and variable rates, variable rates were oscillating around 0. However, the group's backlog in fixed rates is growing at 7%: so Asseco Poland 10%; Asseco International 8%; and Formula Systems 6%.

In Formula Systems, there is a slight change regarding what we consider backlog in Sapiens. Last year, we had this correction in Matrix, now in Sapiens. So if we looked at it like for like, this formula would be slightly higher. This is why we have nothing to worry about here. However, backlog in Asseco Poland we can see that, respectively, it is the public sector than banking and finance and enterprises come third. I believe we have a similar situation at the end of the year. So they are analogical trends as well. That is it from me. Thank you so much.

[Artur Wiza, executive]

[Interpreted] Thank you, Karolina, for presenting such strong results and for such a good outlook to the end of the -- or maybe the second quarter of the current year. Thank you, Marek, for summarizing the activity. To remind you, we have a panel of chat where you may ask questions. Our conference today is being held in both Polish and English languages. Therefore, we invite you to ask questions in both languages. Those of you who are watching us from outside of Poland.

We have first question. I congratulate you to such strong hours. On what scale, although we have income and results of the companies on the market in Poland that you've mentioned on the conference for journalists in the context of acquisition. We have 3 companies were on the Polish language -- Polish market where we are negotiating. Marek, this is a question to you.

[Marek Panek, executive]

[Interpreted] Well, yes, we've been calling down the smooth when discussing with journalists because right now, we are speaking about prices. We are speaking in a very serious way with 3 companies, but those are not very big subjects. One is around PLN 30 million of income and 2 others are much smaller under PLN 10 million. This is interesting from the point of view of products or competences. But the journalists were informed by us that it has been happening recently that we've had plenty of conversations ongoing. And usually, they end at the stage where we are currently now, which is the stage of discussing prices because we can see that we are competing funds that are that have found that they need to spend. So there's a pretty big competition, we will see how it goes. We would like the acquisition to happen, but we will be very careful when it comes to the price. Thank you.

[Artur Wiza, executive]

[Interpreted] Another question. When the company is going to take a decision on the fate of their own assets that were purchased.

[Karolina Rzonca-Bajorek, executive]

[Interpreted] Well, as we've said at the end of the year during the conference, we don't feel that there is any important time pressure. We are watching what's happening when it comes to the Polish market and when it comes to the macro scale. But today, we have all the scenarios on the table. I don't want to now present you with the date of decision, which is going to be taken because we are booking the time to take the best possible decision for our investors, and it might take some time more.

[Artur Wiza, executive]

[Interpreted] Another question. Are you able to estimate what value of contracts from the European Union funds are going to be there in the 2025-2026?

[Marek Panek, executive]

[Interpreted] It's hard to specify what will -- what contracts will be there. We can only relate to the market chances. We keep on mentioning that this is a very big impact on the whole of the market, not only IT market but also the economy.

When it comes to the recovery and resilience plan, then 25% of the funds are going to be allocated for innovation and new technologies. So this is going to fuel our clients who will be investing in such solutions. We are looking in a very positive way at the local governments at SMEs, but also at such projects which are bigger and might be organized by the state in order to increase the detailization for the citizens. This is to put it shortly. But when it comes to the value, it's hard to tell at the moment. We don't have yet a project that we could name or we could mention the value of. Should those be showing up, we will be trying to inform you in the future quarters.

[Artur Wiza, executive]

[Interpreted] Another question. How do you assess the current pressure and the perspective of the next year, the forecast of salaries in the IT sector.

[Karolina Rzonca-Bajorek, executive]

[Interpreted] With the cost of remuneration has not been growing since last year, please compare to the Polish market. Well, generally, the first quarter showed the same trends, which we've discussed at the end of the year. Indeed, the situation from the point of view of ours as the employer, it's stabilizing. We've reached an optimum when it comes to the human resources we have at our disposal today compared to how we've constructed the backlog and what we have chances for. But when it comes to the costs, it has been noted that there is a trend that is stabilizing.

An average salary in the group is growing when it comes to single-digit dynamics quarter-by-quarter, that's in all the segments of the group. I think that the trends which are in Poland can be transferred to all the places where we operate. I believe that Poland, the Balkan, Central Europe, those were the places where -- and Portugal, too. Those are the places that felt the pressure most. At the same time, it takes the most time to recover. But from our point of view, quite likely, we've already had the turning point. We can see that there are less applications to the job offers. And because of the fact that we have such a geopolitical situation and the macro situation, people are less willing to look for new jobs. So the challenges here might be in case of the new projects to acquire new human resources. But when it comes to what we have today, as I said, we feel that this is an optimum for the time being.

[Artur Wiza, executive]

[Interpreted] We're waiting for the next question. For now, there is no more. We encourage you to ask questions. Should there be any topics you would like us to address? We are at your disposal. Someone is typing, but we don't know yet what it will be. Are there any questions in the room?

No. No one wants to ask a question. Okay, we have something. The next question on shares. So in the light of the forecast for the European Union first. With such a strong cash flow that you've presented, it might be much more beneficial solution to resign on their own shares.

[Karolina Rzonca-Bajorek, executive]

[Interpreted] As I said, we are considering all the options, and we might select this solution because of the point of view of the person who asks this a very rational question. But right now, I don't want to exclude any other scenario. The situation is making us comfortable on taking the decision.

[Marek Panek, executive]

[Interpreted] We can add that having the opportunity of implementing this whole process, we have decided -- as we've said, as we estimated, we wanted to promote the company amongst investors. So we are participating in bigger number of meetings with investors, both in Poland and abroad. We are meeting with investors, who are individual, and we want to promote the new approach of the results presentation. It helps the investors that we're not familiar with our company until now and who can see bigger interest in our companies, so we are very happy that we may again show the company after 20 years that we've been present on the stock exchange.

[Artur Wiza, executive]

Another question, in which time the company is planning to pay the loan that was used for the purchase of own shares?

[Karolina Rzonca-Bajorek, executive]

[Interpreted] As I informed we are going to do it in the planned harmonogram. I want to remind you that the basic plan is the plan to pay monthly the capital rate. And in 5 years to pay the half of capital and at the end, bullet payment for the second part. We -- I have not resigned on the right, and I still want to keep the right to say that [indiscernible] might happen that a small part of the debt we might have to roll it. But it will all depend on how the situation of results and the cash would look like. Today, I would like to say that the basic scenario as it was in that -- at the time when we were taking the loan.

[Artur Wiza, executive]

[Interpreted] How do you assess backlog shaping in 2024 -- in May 2024 increase -- slowed down in all the segments compared to May 2024.

[Karolina Rzonca-Bajorek, executive]

[Interpreted] Well, here, we, of course, see the numbers and we can see slowdown. Please remember that sometimes those are the effects in one point. Signing one big contract in public may cause this number to look very well. But today when looking at dynamics, we feel that there is nothing to worry about. And when looking at the burden of our resources, at how this whole year should look like, we are pretty calm. Let me remind you that the dynamics in the similar period of last year was slower. At the level of group, it was plus 4%. Now it's plus 4% -- plus 7%, sorry. So this seems that it's a satisfying result number.

[Artur Wiza, executive]

[Interpreted] Another question, what EBIT margin are you expecting in 2024?

[Karolina Rzonca-Bajorek, executive]

[Interpreted] Our EBIT margin is impacted by so many factors that is hard to formulate any expectations. We are trying to have such a policy of not surprising our investors. Today, the results for quarter 1 can be a benchmark, but the rentability, how it looks like on the level of the group is dependent on the share of particular subgroups in the results. So it's very hard to precisely give a value. We have such an ambition to keep on working on rentability, but to improve operational rentability, which is caused by more efficient use of resources. It's a process. Today, we are not focused on looking at it in the short term, but long-term way. That's what we are working on. It's for sure our ambition. We have the ambition of formulating budgets and working on rentability. And it is our ambition for the rest of the year.

[Artur Wiza, executive]

[Interpreted] Another question. Can you please comment on the assets in Israel referring to a pretty high program for CEO? And don't you think that the sale of assets could create value for stakeholders?

[Karolina Rzonca-Bajorek, executive]

[Interpreted] Well, when it comes to the CEO program, this is a topic, which has been ongoing for years. Mr. Guy Bernstein, who is the beneficiary of the program, is co-creating the value of the group. Today, it's 2024 and the -- as far as I remember, in 2027, the program is going to end. It's been 8 years. We are recognizing the cost of program in a linear way. When it comes to Formula, we've always believed that the key to generate long-term value is to have people on the ground in the company and that who would have the same interest as us and stakeholders, Asseco Poland in order to achieve this goal. Mr. Guy Bernstein has received such a program that aligns his interest with our interest. So we believe that up till now, the values and the contribution have been delivered and we are happy. But here, I don't want to give an absolute number because we are focusing on creating a long-term value, both in case of System Formula and in case of Asseco Group and in case of Asseco Poland.

When it comes to the second part of the question regarding sales, I would say that we always and every -- and all the time -- if you are asking about own shares or acquisition or potential sales transactions. So we are thinking of scenarios and of different scenarios. Here, there are different scenarios that we are considering. We are calculating them because this is what conscious management of such a big group requires.

As of today, it seems that Formula System contributes to the Asseco Group at the level that corresponds to our expectations. There are no indicators that would give a forecast of any other kind. At the moment, we are not going to take any other ad hoc decisions.

With the dynamics that is clean of the real estate part can also be the forecast for the rest of the year. As I have mentioned, those quarter-to-quarter results, taking away the real estate are organic results. Of course, there are certain question marks. There is also a larger potential in some places, which, at the end of the day, balance each other surely. I would say that we can look at the first quarter as a quarter that is a benchmark quarter. However, it does not mean that today we promised you the same dynamic after Q2 dates because there are too many variables. Of course, what we need to keep in mind, there are certain businesses that seem to be also a cyclical nature. They -- for example, this is the e-signature and the first quarter is always the best quarter of the year. So if you look for forecast, long-term forecast, you have to take a longer time frame. This is when we also look at, for example, we talk about longer time frames. So 1 quarter would not be enough to be able to speak of the following 3 quarters.

[Artur Wiza, executive]

[Interpreted] The next question, and Karolina has partially responded. Why do we have a decrease in the backlog regarding, well, compared to March? We have commented that, Karolina?

[Karolina Rzonca-Bajorek, executive]

[Interpreted] We have got a better dynamic when it comes to ERP and Asseco Central Europe, the dynamic has slowed down, and I believe that, that was commented during the Asseco conference.

[Artur Wiza, executive]

[Interpreted] Can we see better dynamic after the elections. So do we see that in Poland? Or do we still see the dynamics that a new party is taking the power over in the country?

[Karolina Rzonca-Bajorek, executive]

[Interpreted] Well, we have got certain projects that are ongoing or there are certain projects that were ordered at the end of last year. However, we do observe such clients in Poland, where there is an operational issue with the acceptance of our works. This is not really a threat to our result. It is just a perturbance in the cash flow. So that may also slow down certain projects or new orders or certain goals. However, it seems that we are at a point where the pressure that IT projects would be implemented in public institutions that such organizations really make sure that they are operational. So we believe that the situation should improve even in places where at the moment, temporarily, there is a slowdown in, I would call it, in the decision-making and we observe it.

[Artur Wiza, executive]

[Interpreted] Speculations. Could you please comment on the potential transaction 5?

[Karolina Rzonca-Bajorek, executive]

[Interpreted] First of all, I do not want to speculate. That's not my role here. At the moment, we have no information regarding Sapiens. It's -- as far as I know, well, I have no knowledge that a transaction should take place regarding this company.

[Artur Wiza, executive]

[Interpreted] Let me refer to the interview that Karolina gave on TV today. So are we looking for a partner? Are we looking for a husband? Yes, of course, it was about selling our shares. We don't look for a partner. But of course, we do look for investors, and we always be active regarding looking for new investors. I believe that this was the last question. Okay, someone is typing at the moment, and we can wait for that last question. But if there are no further questions, then we would like to thank you for participating in our conference. Of course, contact our Investor Relationship Department if you have got any questions regarding our activity on the stock exchange. I would already like to invite you to join us during the conference presenting our results for the first 2 quarters.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]