We make available to investors the annual 2020 preliminary report in the form of a web page, easy to follow and navigate only to the relevant sections for each reader. Use the Menu on the right to navigate between sections of the report!

We invite you to send us your opinion about this reporting format to the email address investors@bittnet.ro.

Letter from the CEO 

2020 was a challenging year for companies around the world. Despite this, we are grateful that for fiscal year 2020 we keep our tradition and say, again, that we had the best year in history, achieving a solid financial performance marked by an increase of about 9% in consolidated revenues to RON 108.6 million, a 20% increase in the gross margin generated and, an increase of over 5 times the operating profit compared to 2019 – from RON 838k to RON 4.31 million. The consolidated net result of the Group increased by almost RON 2.7 million, becoming profitable again. 2019 is therefore the only year in history when this indicator had a negative value. 

In a year in which most of the companies were either severely affected, partially or totally shutting down their activity, or having their turnover decrease by 10-20%, our Group achieved an operating cash flow of over RON 8 million, as in 2019, which, combined with access to the capital market, allowed us to apply Warren Buffet’s suggestion to be brave when others are afraid. Therefore, in 2020 we made new investments in businesses, worth over RON 10 million, and we already start to feel the positive effects of these decisions in 2021. In addition, we also strengthened our financial position. In 2020, we managed to consolidate our “financial fortress” ending the year with almost RON 25 million in cash, compared to 21 million last year. 

2020 marks the end of a decade in which the company has grown over 50 times, becoming the market leader in most segments in which it operates, but also the first IT company listed at Bucharest Stock Exchange. Starting with 2020, our shares are traded on the Main Market and we are part of relevant indices such as BET-XT. This week, FTSE Russel announced the inclusion of BNET shares in two global ‘micro-cap’ stock indices. 

As Bill Gates said, most people overestimate what they can do in a year but underestimate what they can do in 10 years. We thus look with confidence to the next period that will be marked by the transition to an increasingly digital economy, in which the winners will be the states and organizations that will succeed in reinventing themselves digitally as quickly and as much as possible. 

In many ways, last year was a test of maturity for our team, for management in general, for our plans to become a regional digital player for medium-sized entrepreneurial companies in the CEE. Looking back over the last 10 years, we believe that we have had an extraordinary journey and we would like to thank those who have been with us all this time – colleagues, investors, business partners and last but not least customers. 

Just as bridges are subjected to extreme endurance tests before inauguration, so has 2020 been a sum of endurance tests for Bittnet Group. I am happy to tell you that we have passed these tests well and our Group is more financially and operationally ready for a new cycle of accelerated growth, adapted to the new business reality, to the new challenges and local and international market opportunities. We have a mature and experienced top management team that has overcame the resilience test of recent years. 

From an operational point of view, the Group works better in the new dimensions and we will always continue to improve all aspects where we can make a difference, and as proof stands the fact that in total, we generated business of almost RON 140 million during this difficult year. A part of these projects will be delivered only in 2021, partly due to delivery delays generated by lockdowns on the international supply chain in case of deliveries of hardware equipment, and partly due to the December elections in our country, which generated delays in various procurement procedures 

On the other hand, the fact that some of these projects could not be delivered during 2020 only strengthens our confidence in the future – these revenues will be added to those to be generated in 2021. As showed in the following chart, the year started strong, sales generated in January 2021 being double compared to last year, which motivates us to enter with great ambitions this year. 

Looking to the future, we believe that a period of several years will come with the unprecedented acceleration of digital processes across the economy, without major political events, and we are confident that we will continue to see significant revenue growth: 

  • for the education division, as employees, in order to better meet the needs of the market, are in a continuous process of professional retraining. In this sense, the programs and initiatives on our agenda such as the national reconversion project CTRL+N or the international platform DevOps Artisan were launched in advance and today, we are better positioned to respond to the needs in the area of ​​digital skills development 
  • for the technology division, as organizations continue on their path to digitalization, forced to adapt to the new context with funding either from their own resources or from accessing government programs backed by EU funding for digitization. The Confidex study for Q4 2020, recently published by Impetum Group, which analyzed over 700 companies with businesses of over EUR 1 million, shows an increased attention to digitalization, investments to increase productivity, but also the implementation of work from home in proportion of 50% – in the case of more than half of the companies. 

The initiatives launched in 2020 will continue in the coming years at a pace at least as fast, due to the fact that the digital transformation is an ongoing process that brings financial and operational benefits after each stage implemented. Thus, companies are aware that each step of digital maturity means better financial performance, the ability to achieve efficiency and operational control and a higher degree of customer satisfaction. Therefore, as our clients’ financial results improve, we estimate that their interest will continue to grow for new technologies. In addition, the measures adopted by the Government support the direction of digitalization as a pillar of economic recovery.  

2020 has demonstrated how important digital assets have become to our economies and how networks and connectivity, data, artificial intelligence, and basic and advanced digital skills support our economies and societies, enabling work to continue, tracking the spread of the virus and accelerating research of medicines and vaccines. 

As the Digital Challengers report prepared by McKinsey shows, the CEE region has an additional potential for digital growth, and Romania has a considerable role in this context. We are among the regional leaders in terms of digital infrastructure and its accessibility. We have a vibrant technological ecosystem, with two unicorns, a wide range of talent and a significant percentage of digital service users. 

According to the DESI Index conducted by the EU since 2014, which measures the degree of digitalization of European companies and economies, Romania ranks 26th out of 28 member countries, which means that we have a long way to go to catch up European average. Therefore, I have stated publicly on several occasions that “digital infrastructure” should become a national priority for any Government of Romania to support economic recovery and to transform Romania into a European economic power. Both Romania and the other countries in the CEE region have a great potential to reduce the gaps with the advanced economies of the EU. 

At the level of Bittnet Group, we have launched a series of initiatives aimed at both the size of human capital and the integration of digital technology by companies (2 out of 5 pillars measured by DESI): 

  • On December 1st, 2020, we launched the CTRL+N professional reconversion program. Today, less than a year after the public announcement of the intention to develop this program and less than three months after its official launch, we are happy to provide 30 courses wit help of 5 of our trainers. So far, 82 Romanians have subscribed to courses, some of them through the scholarship program launched with our partners, others funded by their companies or even using personal sources, understanding the need to learn new skills and prepare for tomorrow’s jobs. Following the extensive communication campaign carried out for this project, we expect a steady growth of students during 2021. 
  • We started, together with major technology partners such as Microsoft but also with business partners such as Raiffeisen Bank, Banca Românească, Eximbank, ProCredit Bank, programs for the digitalization of entrepreneurship in Romania. These steps started in 2020 and will hopefully continue in an accelerated way in 2021. An extremely important aspect is the alignment of these steps of the technology division with the National Recovery and Resilience Plan – respectively the digitization programs for SMEs.  

An extremely important project that started in 2020, and which will continue in 2021, is the rethinking of business processes and modeling of IT platforms, to support them depending on the buying journey of our customers. This allowed for a closer analysis and understanding of how they buy, the steps they take in the buying process and the reasons why they work with one supplier or another. In this way, we become aligned with our customers, we increase the value we can bring, while managing to improve operational efficiency parameters (conversion rates from prospects to customers and finally to loyal and recurring customers). Moreover, it allows us to attract new customers in a more structured way in the new business reality (“low touch economy”).  

We aim for a profitable, sustainable and accelerated growth and this can be achieved by focusing on customer segments where we already have a high profit rate, correlated with a higher profitability percentage 

The widespread concern for reinventing the business model at the level of each organization, pursuing and adapting successful models of SaaS companies (subscription based, Software as a Service) has led to multiple changes in the way we prospect new customers, in the way which we serve and make sure we deliver what they want and finally, in the way we turn them into loyal and recurring customers. The upgrade of IT platforms to track these processes started in 2020 and will continue in 2021 

Starting from this point, the changes spread to the marketing team in the priorities and tools adopted but also to the business development team or even to the emergence of new teams dedicated to customer success 

An increased attention has been to attracting and developing human capital by operating in a service business where the value of human capital is essential for medium-term success 

To support these transformations and to maintain the DNA of the organization, we rethought the way we attract, recruit and onboarding new colleagues so as to increase the degree of belonging to the business values ​​we believe in. Starting with 2021, we manage to improve the leadership academy based on which we will build key skills at the level of the entire organization, offering career development paths to the best of our colleagues. 

If so far I have explained about the organic evolution of the group and the continuity of plans aimed to become a better organization, I still want to bring to the attention of shareholders the M&A activity that comes to support BNET’s plans to become a regional digital player for entrepreneurial companies in the Central East Europe 

During 2020, we formed a team of external consultants with whom we started a systematic process of prospecting possible investment targets and on the occasion of the GMS of 26.11.2020, the shareholders approved the first 4 transactions in Romanian companies with growth potential that complete the offer of digital transformation of the group. By the time this report is published, we have already completed 3 significant transactions for the group’s development since 2021: 

  • The acquisition of most of Equatorial Gaming shares so that we reached a proportion of 99% of the company, in order to fully integrate operations into ​​Bittnet Education, once validated that the model is correct and that the team shares our values; You can read more HERE. 
  • Entering the shareholding of the educational services company The eLearning Company – which instantly expanded the product portfolio with trainings in eLearning format but also that of customers, to whom we can now propose more complex solutions, based on the UXI platform and our “core” trainings. You can read more of this M&A project 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 start this journey right. You can read more about this investment project HERE. 

On the other hand, in October 2020, we participated in the private placement for Safetech Innovations shares (BVB: SAFE) where, due to the high degree of oversubscription, we were able to place only an amount of approximately RON 300 thousand in investment. So far, our investment has brought a yield of 700%. Although we consider that the field of cybersecurity is relevant both for our activity and for the future, the small size of the amount invested does not allow us today to treat this investment other than as a financial investment in tradable liquid assets. 

We estimate that during 2021 the M&A activity will be intense so that we will bring to the attention of investors in general meetings a series of investments both in Romanian companies and in EU companies, in line with the international expansion plans previously communicated 

We reaffirm the belief that the acceleration of the digitalization of entrepreneurial companies is the engine of economic development in Central and Eastern Europe and we want to play a key role in this process. Therefore, at the BVB Main Market event, we publicly assumed the intention to reach a value of the BNET group’s turnover of EUR 100 million in the next 4 years. 

From capital market journey point of view, the major event in 2020 is the transition to the Main Market, on June 3rd, thus marking the beginning of a new stage in our group’s development. After the first month of trading, we found a doubling of the daily liquidity compared to the AeRO-SMT market, but also the appearance of 3 investment funds as our shareholders, together with 3 other investment companies 

The increased liquidity of BNET shares meant that, only 3 months of trading on BSE Main Market, our group’s shares were included in several indices: BET-XT, BET-XT-TR, BET-BK, as well as in ‚ extended main BET index BETPlus. The inclusion was made by the BVB Indices Commission starting with 21.09.2020. Additionally, starting with March 2021, according to the announcement made by FTSE Russel on February 22, 2021, BNET shares are also included in two global indices: FTSE Global Micro Cap and FTSE Total-Cap 

In 2020, the average daily value of transactions with BNET shares amounted to approximately RON 224K  per trading day, increased 25% compared to 2019. The total value of transactions amounted to RON 56 million for a volume of almost RON 63 million BNET shares, which represents 27% of the total shares registered on December 31 (and 39% of the free-float). As at the beginning of the road on the AeRO market, the volume expressed as the number of transactions paints an additional picture of liquidity and investor interest: transactions with BNET shares represented 3.6% of the total number of transactions on the Regulated Market. 

Market capitalization of BNET appreciated by 22% during 2020, and for the investors who participated in the capital increase from March-April 2020, the yield was 40%. It is the fifth consecutive year in which the investment in BNET shares far exceeds the investment in the market index. At a cumulative level, from 2015 until now, there is no other investment on the Bucharest Stock Exchange, more profitable than BNET. At the end of 2020, the company had over 2,500 shareholders and a market value of RON 159 million 

During 2020, we continued to carry out market operations as in previous years, both by capitalizing on existing resources and by attracting funds through capital increases: 

  • A capital increase with new cash contributions (February – March 2020) – we raised RON 9 million through the capital market mechanisms, representing a 100% subscription, in the full context of crisis on international stock exchanges. The capital was used for M&A investments and the strengthening of the company’s financial position. We are grateful to all the investors who gave us their trust during that period and wish them prosperity with us in the long run. 
  • A capital increase with 7 free shares for every 10 shares held (July 2020) 
  • A capital increase with 1:10 treasury shares and cash distribution to shareholders who have opted for it (July – December 2020). 

You already know about our concern for improving the relationship with investors and the commitment to set new standards in the capital market regarding access to information and the degree of transparency with which we choose to conduct our business. Therefore, we aim to become the most digitalized issuer on the capital market and in line with the principles of the European Directive on Shareholders’ Rights, but also based on our principles of transparency and openness to shareholders. In this regard, in 2020: 

  • we have constantly improved the website for investors, which contains much more resources than are published on the website dedicated to our shares. If you have not yet done so, we invite you to visit it here: https://investors.bittnet.ro; 
  • we have made efforts to increase the number of newsletter subscribers through information campaigns. If you do not yet receive our newsletter, you can subscribe at: https://investors.bittnet.ro/ro/abonare-newsletter/  
  • we dedicated time and resources to social media channels and dedicated investor groups where we tried to address all the questions received; 
  • we organized the information presented in the quarterly and annual reports so that it was easier to navigate, to which we added info charts to make it easier to remember; 
  • we have activated the web traffic analysis offered by Google to better understand which web pages are more relevant to those who read our reports and we have decided to focus on the wider development of this content; 
  • we have successfully organized, in virtual live format, the General Meeting of Shareholders during the year as well as the events for investors and analysts. In particular, at the GMS of 26.11.2020 we made available to our investors an electronic voting application in partnership with eVote and we recorded the GMS in which most shareholders participated, over 240, a new maximum registered by BNET; 
  • we continued, even in the pandemic context, our main event – Bittnet Investor Day, where we addressed all the questions received from investors 
  • we participated in international roadshows with institutional investors from all over the world who were interested in exploring the opportunity to invest in the only IT company listed on BSE‘s Main Market; 
  • we have launched two new tools for shareholders that we consider to be very relevant in better understanding the functioning of our group, but also the investment opportunity, and why the long-term investment is valuable: 
  • Financial results tool: interested investors can check what effect various assumptions about increasing / stagnating / decreasing income or expenses would have on the financial results of our group. The tool is available online at: https://investors.bittnet.ro/ro/modelare; 
  • Investment return tool: investors can test the historical return of Bittnet shares, between any time between April 2015 and the present, being able to observe for themselves how an investment would have evolved at any time. It is available at: https://investors.bittnet.ro/ro/calculator-investitie/  

We started this year with a discounted capital increase operation for investors. Stage 1 of the subscription lasted 30 days and ended yesterday. During this period, we registered subscriptions worth RON 10.2 Million. A private placement follows to sell the remining 819.408 shares, and then the trading of BNETR09 allocation rights, until the registration of the capital increase at the Trade Register, FSA and the Central Depository 

The next capital market operation is a public offering of preferred shares, according to the approval received from shareholders at the General Meeting in November 2020. Thus, investors in these shares will receive a preferential dividend of 5 to 10 bani per share, without the right to vote. The amounts raised through this operation will be used for the early buyback of the bonds issued by the company in 2017 and 2018, so that the amounts previously paid as interest will be available to be distributed to the preferred shareholders. The company will thus reduce its indebtedness rate and financial expenses, recording a gross profit in the future closer to operational profit.  

The capital raised in the two operations will be allocated to the objective of reducing the degree of indebtedness taking into account the cash requirement for M&A operations in the next period and in the conditions of continuing to generate positive cash flow from operational activity. 

As in previous years, we will propose to shareholders the distribution of free shares, we estimate in a proportion of 7 free shares to 10 shares held. Details of the procedure, as well as the allocation ratio, will be announced in the convening notice for the General Meeting of Shareholders scheduled for April 27, 2021, which will again be held completely digitally, using the eVote solution. 

With the ongoing capital increase operation associated with the issuance of preferred shares, we will have a significantly strengthened financial position of the company, much more suitable for the business scale we have reached, directly rewarding investors for their trust in a more attractive way from a fiscal point of view. And better representing the global profitability potential of the group. 

In conclusion, we ended the year 2020 satisfied with the results generated at the group level in the context of high volatility and general unpredictability. The results obtained in January 2021, double those recorded in January 2020, give us confidence that we will continue this year the strong accelerated growth with which we have accustomed so far to all our investors. For 2021, our goal for turnover is over RON 150 million, which will generate a tripling of operating profit. This document includes for the first time the indicative budget for 2021. 

We invite you to read in details about the results of our Group in the following pages or sections, if you are browsing a digital version of our financial report. As always, we remain open to receive your feedback or to answer any questions at email: investors@bittnet.ro

Mihai Logofătu,  
Cofounder & CEO Bittnet Group