A message from the CEO

Mihai Logofătu, Cofondator și CEO Bittnet GroupIn Q1 2023, our Group recorded consolidated revenues of RON 53.5 million, with an increase by over 63% compared to the same period last year, as a result of accelerated growth in the IT&C integration activity (80% increase vs. Q1 2022). At gross margin level we record an increase of 32% from RON 6.5 million in Q1 2022 to RON 8.6 million in Q1 2023. The increase in indirect, administrative expenses recorded over the past year has led to the recording of an operating loss at group level in this first quarter of the year of RON 2.3 million compared to approximately zero in Q1 2022. At the level of the financial result, we record a decrease in the loss, from RON 3.1 million in Q1 2022 to RON 574 thousand in the first three months of 2023. Thus, the gross result remains in the negative interval, in line with last year: a gross loss of RON 3.3 million, versus RON 3.5 million in the same period last year.

From an annualized perspective (“last 12 months”), the evolution of results reconfirms our group’s ability to increase revenues and operating profitability: consolidated revenues amounted to RON 213 million, up almost 74% compared to the previous period, while gross margin to RON 45 million, up 67%. During this time, operating profit had a positive evolution of 35% reaching RON 6 million.

We record a solid financial position, with debts to suppliers covered by receivables from customers and stocks to be invoiced. Receivables from customers are 54% higher than in the same period last year, while business is up 63% and total financial liabilities (short and long term, ignoring ‘lease’ liabilities under IFRS16) are approximately equal to the cash position (RON 43 million). Compared to Q1 2022, total assets are up 84% to RON 226 million and equity is up 80% to RON 87 million.

In terms of cash flows, typically for the first three months of the year, the operating loss generated a cash outflow of RON 2.2 million, similar to Q1 2022, with net cash of RON 11 million drawn in through financing activity being used to cover this amount and to pay for net investments of RON 8 million (RON 7 million company acquisitions and RON 1 million fixed asset acquisitions). It is important to note that the amount of RON 11 million net cash from financing activity resulted after the significant reduction of the debt ratio through the repayment of debts (bank and bond) amounting to RON 15 million. Under these circumstances, the cash position at the end of the quarter is RON 43 million, compared to RON 19 million at the end of Q1 2022. We are thus well placed to access funding this year both from the capital market, through successive listed bond offerings, and through bank loans, especially for M&A activity.

Since listing in 2015 on the Bucharest Stock Exchange, Bittnet Group has achieved a Compound Annual Growth Rate (CAGR) of 48% in revenue, 59% in assets, 69% in equity and 40% in operating profit. Also during this time, the average annual return on equity (ROE) amounted to 55%.

In the first three months of the year, we have successfully completed the largest round of capital increase carried out so far, during which we have drawn RON 32 million. Thus, taking into account the current equity and strong cash position, as well as the ability to produce a positive cash flow year after year, the group is positioned as a good candidate to access further financing, thus being able to carry out complex business projects as well as successful M&A investments.

During April, we received a notification from the Competition Council regarding the approval of the purchase transaction of Dataware, the final authorization decision to be sent in the next period. The company will join our group under the Cloud & Infrastructure pillar and we expect the transaction to close in Q2, so that the Dataware results will be consolidated starting in June or in Q3. We continue to actively work to seek, identify, negotiate and implement both size significant transactions and bolt on acquisitions for each of the business lines.

Given the increase in the organizational structure registered in 2022, up to a level that we believe can support a business of RON 500 million (the target undertaken for the end of 2024), we announced a change in the organization’s focus, towards efficiency and profitability, starting with this year. The income and expenditure budget approved at the end of April 2023 by the shareholders reflects this transition towards increased profitability, with a slowdown in the pace of turnover growth but a doubling of EBITDA and operating profit (from RON 8.5 million in 2022 to RON 18 million targeted for 2023).

Each of the companies in the group has different opportunities and challenges, given the specifics of each of them (size, type of products sold, type of customer, etc.). Although this three-month period is very short, we are already seeing positive signs, which leads us to continue the process of streamlining the business in order to achieve the objectives planned for this year.

As always, we welcome your questions at investors@bittnet.ro.

Mihai Logofătu,
Founder and CEO Bittnet Group