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A message from the CEO

Today we present, for the first time, the results for the 9-month period ended on September 30. We are happy to showcase our shareholders a solid performance recorded in this volatile environment: a consolidated turnover of RON 75.8 million, which represents an increase of over 36% compared to the same period of last year, well above the pace of the IT industry in Romania or other companies from the BET-XT index. 

The operating profit for the period is RON 1.8 million, RON 7.3 million higher than in the same period of last year. The Education Division of our Group registered operating result improved by RON 600K compared to the same period of 2019, going from an operational loss of approximately RON 300K to an operating profit of RON 300K, while the operating result of the Technology Division increased by 6.7 million RON, from operating loss of RON 5.2 million to RON 1.5 million operating profit.

This positive evolution of the financial results is due to the increase by RON 7.7 million of the gross margin, an increase that is divided into RON 900K growth for the Education Division and RON 6.9 million growth for the Technology Division, amid the RON 665K reduction of fixed expenses and of the increase by RON 1.3 million of the sales costs.

Historically, given the seasonality of budgets and spending patterns in the IT&C sector in Romania and globally, Bittnet’s most significant results have always been recorded in the last months of the year, more precisely in Q4 of each year. We would like to mention this beacause until now, being listed on AeRO, we have only published the half yearly results and the investors did not have a chance to understand entirely how our perfomance differs from one quarter to another.

As a guideline, historically, the results for the first nine months represented approximately 60% of the turnover for the year, while Q4 contributed approximately 40% to the total revenue. This is due to the specifics of our client: large, very large and even giant companies, which operate with annual budgets.

Below we provide a graphic that captures the historical quarterly evolution of turnover. The same trend highlighted in the period 2015-2019 was observed also in 2007-2014.

Benefitting from the opportunity, we would like to mention that in Q3 our group recorded a turnover similar in size to the individual turnovers of Bittnet and Dendrio in 2017, and even higher than the amount of 2016 and 2015 combined.

Over the years, along with many other global investors and managers, we have expressed our concern and questioned whether the quarterly results really bring value to investors. Our view is that quarterly reports risk shifting the focus of both management and shareholders from long-term vision to short-term vision and achieving quarterly goals.

We hope that all our stakeholders will understand that for a fast-growing company like Bittnet, quarterly reports can come with new information but, at the same time, they could actually bring more “noise” than “signal”.

The rest of the analyzes and presentations, starting with this report, will be built by analyzing as much as possible 12-month periods, trailing 12 months – on the principle of the moving average – to give a better measure of the direction in which the company is headed, but also of how it should be analyzed by shareholders.

Under this model, of analysing periods of at least 12 months, we can see that in the last 12 months we have already reached the proposed 2020 indicators. Thus, we enter the Q4 with the idea that, if we record only the same quarterly results as in 2019 (without any increase), we will end 2020 in line with the budget approved in the GMS in April. Yet, as in all previous years, “the match is played until the 90th minute”.

In the first 9 months of the year, Bittnet shareholders gained almost 9%, a yield with 16pp above the market average represented by the BET-XT-TR index, which fell by 7.55% even though it includes dividends. This trend is well known and visible globally, showing why it is relevant to invest in technology companies. The shareholders who invested in the capital increase in Q1 registered a profit of 29% as of September 30, without taking into consideration the cash distribution related to the EGMS Decision 2020 no. 3.

As in all previous reports, we mention that the price evolution is very well supported by the increased liquidity of BNET shares. As a result, just 3 months after the promotion to the Main Market of BVB, BNET shares were included in several indices, including BET-XT, of 25 most representative companies based on their liquidity. In the first 9 months of the year, 21,036 transactions were registered (out of which 10,669 after the transfer to the Main Market). The total traded volume was of 46,020,723 BNET shares, which represents 21% of the total number of shares (including the number of shares after capital increases with free contributions and shares) and the total traded value was RON 44,231,834.51.

One of the advantages of the inclusion in the BET-XT index can bring is the diversification of the shareholder base. If at the general meeting in April we had 1,413 shareholders, on September 30 their number had increased to 2,200, among which 8 investment / pension funds.

It has been more than 6 months since we are acting in a totally different market from the one we knew and for which we had prepared at the beginning of 2020; what the specialists call as the Low Touch Economy. The Low Touch Economy refers to how companies around the world have been forced to operate to succeed as a result of Covid-19. The best way to define its meaning is to list its main features so far. To mitigate health risks, companies have been forced to adapt to strict policies, including weaker interactions, limited meetings, travel restrictions, and so on. More reactions in global markets can already be seen. These include changes in consumer behavior, new regulations and supply chain disruptions.

Medical experts and business leaders assume that Covid-19 will directly influence the economy at least until the end of 2021.

More and more market studies, conducted in recent months on the impact of Covid-19 on the Romanian business environment, have shown that a percentage of over 50% of companies are either severely impacted (entire sectors partially or even completely disrupting economic activity) or estimates revenue declines in 2020 with percentage values between 10 and 20% compared to 2019. At the same time, over 1 million people have lost their jobs mainly in the sectors most affected by the imposition of measures to reduce the spread of the virus.

An analysis published by a known Romanian financial daily shows that although the Romanian IT industry had a positive (expected) evolution compared to the rest of the economy – registering a growth of 12% compared to the previous year – our Group continued to grow much above this pace, at approx. 40%.

The companies that will survive the Covid-19 pandemic will be those that rely on business models adapted to this new normal, while keeping everyone in the safest possible conditions.

Like for all the companies, also for us it was a period full of intensified efforts and adaptation to the new reality of work. We migrated most of the activities in the online space (live virtual environment), since the first days of March, continuing to deliver the training sessions to clients in Romania and across the border. At the same time, for the technology division the activities that could not be delivered through digital channels were delivered taking into account all the protection measures recommended by the authorities.

Thus, in T3 we kept all our promises to customers and there were no delays in deliver. Most importantly however, we managed to protect the health of our team members. To date, no member of our team has contacted Covid-19.

We would like to thank all our colleagues again for their efforts, for the mobilization they have shown, and without whom we wouldn’t be able to present these impressive results. And to all our shareholders, yet again I would like to underline the importance of the Stock Option Plan for motivating and rewarding our teams to deliver continously improving results quarter by quarter, year by year. By now, a significant part of our colleagues, extraordinary professionals, are part of the program. In this context, we consider it important to continue using this tool, because, in an extremely competitive labor market, SOP represents not only a chance to align interests, but also an instrument for employee retention.

Over the next 6 months, several strategic projects of the group emerged, benefiting from the global context of the Covid-19 pandemic that accelerated or, for some, even initiated the process of digital transformation. 

We refer here not only to companies, a category covered by the technology division, but also to people who, in the context of a potential financial crisis, are looking for better career prospects. These needs are addressed by two of our recently launched projects: DevOps Artisan and CTRL+N. You can read more about these projects in the next chapter, which shows the evolution of the two divisions in Q3 2020. 

We believe that, in our case, the Covid-19 pandemic offers more of an opportunity than a threat, as this is our time and chance to emerge victorious from this turbulent period. In this context, we look closely at opportunities to grow our business – either through innovative projects developed by our teams, such as CTRL+N, or through M&A projects. 

You can read more about our current M&A plans in the next section. However, we would like to emphasize that at the moment, we are working on a concrete expansion strategy to achieve our goal of representative player at the CEE level, a strategy that we will present to our shareholders in early 2021. According to a report “Digital Challengers” of McKinsey&Company released in October 2020, in the first five months of the Covid-19 pandemic, the digital economy in Central and Eastern Europe has grown almost twice as fast as in the last two years. Given the market context and the opportunities offered by the acceleration of the digital economy in the region, we maintain this strategy and look forward to announcing the first international transactions in the near future. 

We stated in the course of 2020 that we will resume M&A activities and there can be no better time to accelerate the group’s expansion than now. 

In this regard, in recent months we have attracted a team of M&A consultants and developed a framework to identify and attract local companies that share our principles and culture of doing business, and that envision the future of industry development in a manner similar to ours. 

The first concrete results are already visible, so that, for the General Meeting of Shareholders on November 26, we have put forward for vote the first investment projects that we aim for this year: 

  • The almost complete acquisition of Equatorial Gaming shares that we do not currently own so as to reach a proportion of 99% of the company, in order to fully integrate operations in the area of Bittnet Training, knowing already that the model is correct and that the team shares our values; Read more HERE. 
  • Entering the shareholding of the educational services company “The eLearning Company” – which will instantly expand the product portfolio with trainings in eLearning format but also that of clients, to whom we can propose more complex solutions, based on the UXI platform and our core trainings; Read more HERE. 
  • Entering the shareholding of the company “Softbinator” – a Romanian software development company that has had in recent years an annualized growth even higher than that of Bittnet. This important area of the IT&C service landscape has so far been missing from our portfolio, and we believe we have a good chance to get this journey off to a good start; Read more HERE. 
  • Investment in the company IT Prepared, which develops an uber-alike platform for IT support”. Read more HERE. 

These projects fall within our strategy on M&A: “bolt-on” acquisitions that help consolidate the Group’s activity in the field of Education (Equatorial and The eLearning Company) but also of Technology (Softbinator and IT Prepared), thus contributing to the development of the portfolio at a time when the need for digital skills is growing for organizations that want to survive in the medium term. 

International studies show an increase in the demand for soft skills courses for IT specialists and especially for team IT leaders. Equatorial experience in terms of content and design capabilities creates opportunity to complete the offer that Bittnet Trainingthe leader in the IT training market, can make to traditional customers. 

We will reposition Equatorial as a provider of “soft skills” for the Romanian IT industry. At the moment, this brand space is not occupied and we will be able to generate additional income that until now have not been accessed neither by Bittnet Training because we did not have a product, nor by Equatorial because we did not have access to this market. 

The investment will be complemented very well with The eLearning Company products: the electronic softskills courses, as well as the ‘library’ type consumer platform and micro-learning modules, which, in turn, will complement very well with the UXI platform. 

Moving our attention to the Technology Division, especially to the investment in Softbinator, about which the local press wrote that it could be the transaction of the year in Romanian IT, it completes our portfolio of products and services in an area that does not exist at all within the group. 

Most digital transformation projects involve a mix of technologies, products and powered by cloud, so in the new formula, the ability to deliver more complex projects for our customers increases exponentially. Softbinator Technologies has experience in attracting international clients, Bittnet has an impressive list of local clients and the two companies can mix the two expertise to expand a common portfolio of clients. Bittnet Group delivers infrastructure and integration solutions, Softbinator can complement with custom development solutions over integration. An efficient mix of integration and development can be created, through this synergy given by the complete delivery of services. Softbinator Technologies already had a fruitful collaboration with Bittnet Training, delivering custom trainings together in the last 2 years, on topics of great interest such as DevOps and Agile. 

The investment in IT Prepared or the acquisition of their ‘uber-alike platform for IT support’ would allow Dendrio to ‘steal the start’ in offering this type of services to the group’s clients, on a much larger scale than ever before. 

This expansion and entry into the shareholding of several IT companies is part of our growth strategy, which we have already tested and refined in recent years. Along with an organic growth of 40-50% per year, the continuous expansion of the portfolio of products, services and customers can be done very well through M&A processes. 

According to the principles of efficient capital allocation, we negotiated with each of the companies in which we will enter the option to pay as much as possible for their shares with Bittnet shares, through an equity swap. 

As long as the valuation of our company will be made at multiples higher than those at which the investments are made, the payment of purchases with BNET shares will automatically generate the increase of the value of our company. 

After the end of the third quarter, but before sending this letter, the first analysis report was published by analysts from Wood&Co – one of the most prestigious investment banks focusing on the CEE area. Wood analysts recommend BUY for Bittnet shares, given a target price of RON 0.973, which represents at the time of publication of the Wood&Co report a potential increase in the share price of +49.6% – about RON 1. The most important aspect highlighted by this analysis report is the confirmation of the models adopted by Bittnet’s management, the alignment with global trends and the attention paid to the evolution in the medium and long term, as appropriate for capital market investments. 

The full report is available HERE. However, we mention that this target price as well as the purchase recommendation is based on a financial model in which an average growth of only 20% per year of our business was assumed, which represents a rate well below that recorded so far, of ±70% annual! 

For Q4, our shareholders should expect 3 main events. The first would be the approval by ASF of the documentation for carrying out a capital increase with new contributions and trading the preferential rights. As in the case of the operation carried out in Q1, the investors who participate in the increase will have a yield of 20%, according to the formula approved by the GMS from April 2020. 

Shareholders who invested in the similar operation in Q1 2020 recorded a return of 29% on September 30, and over 50% on the date of publication of this report. 

On November 26, 2020, our company will hold a new General Meeting of Shareholders, also online, as it happened in April 2020. In addition to the organizational and M&A topics described above, a second area of special interest is the inclusion in the Articles of Association of the possibility for the company to issue preference shares, and the approval of a public offer of such shares. 

Preference shares are hybrid instruments that bring multiple benefits to all actors involved: for the company and existing shareholders we will be able to strengthen the financial situation – attracting through this offer RON 30 million, an amount that would allow us to repay the entire value of the bond issues we have at the current moment (BNET22, BNET23, BNET23A, BNET23C). 

This would lead, on one hand, to the total elimination of indebtedness, and to the elimination of the cost of interest, allowing us to publish financial statements that better reflect the profitability of the current activity. Instead, cash that was previously used to pay interest could be used to pay dividends to holders of preferred shares. 

Thus, our company will have approximately the same financial situation (dividend payments would be slightly lower than current interest payments), instead, net profitability would be significantly improved, which could have a positive effect on the price of BNET shares. 

Last but not least, within this general assembly, the procedure for implementing the EGMS Decision no. 3 of April 2020 will be approved. This ratification is essential for the ASF to be able to issue a new certificate of registration of securities, and the shareholders who have opted for the distribution of a new free share, to be able to receive it. We therefore invite you to participate in large numbers in the online voting process, which will take place over several days, and which will require an allocation of less than 10 minutes, to ratify this procedure. 

The full convening notice, as well as the supporting documents for the GMS, as well as the details about the online connection for the General Assembly, are available at this address: 


As always, we are at your disposal for questions, at investors@bittnet.ro. 

Mihai Logofătu,  
Founder & CEO Bittnet Group