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Letter from the CEO

Along the years, together with many other global investors and managers, we have expressed our concern and questioned whether the quarterly results really bring value to investors especially in these times of significant changes. We believe that the quarterly reports risk shifting the attention of both management and shareholders from the longterm vision to the short-term vision and the achievement of the quarterly objectives. Thus, even if the financial statements published according to the regulations deal only with the 3-month period between January 1 and March 31 (2021 vs. 2020), in this letter we will analyze the results in the annualized perspective – Trailing Twelve Months (TTM), which includes the period of 12 months, respectively the period between 01.04.2020 and 31.03.2021.

Sume în Lei

An încheiat la 31.03.2021 An încheiat la 31.03.2020


Venituri din contracte cu clienții 108,405,167 103,025,536 5.20%
Marja brută 20,327,093 20,526,079 -1.00%
Alte venituri 456,452 77,268 490.70%
Costuri de vanzare/distributie -7,787,468 -7,705,363 1.10%
Cheltuieli administrative -10,405,971 -10,601,231 -1.80%
Profit Operational 2,590,106 2,296,753 12.80%
Castig/(pierdere) titluri puse in echivalenta 166,585 -149,137 211.70%
Rezultat financiar -1,639,121 -3,687,031 55.54%
Profit brut 1,117,571 -1,539,415 172.60%
Impozit pe profit -425,060 183,307
Profit net, din care: 692,510 -1,356,108 151.10%
Profit net atribuibil societatii mama 602,966 -1,606,559 137.50%
Interese care nu controlează 89,545 250,451 -64.20%

Astfel, schimbările operaționale pe care le descriem in continuarea acestui document au început sa genereze rezultate mai repede decât ne așteptam, reducând astfel încât riscul de a înregistra o scădere a veniturilor pe măsură ce noile sisteme si abordări încep sa funcționeze. Ca dovada, veniturile si marja bruta generate in perioada sunt similare cu perioada de 12 luni anterioara – noul nostru ‘go-to-market’ funcționează.

Profitabilitatea sporita la nivel de profit brut (si net) este data de îmbunătățirea semnificativa a rezultatului financiar, ceea ce ne reîntărește ideea derulării unei oferte publice de acțiuni preferențiale, care ar elimina costul cu dobânzile, permițând astfel grupului să înregistreze un profit brut mult mai apropiat de cel operațional.

2021 started under the sign of economic recovery both locally and internationally; locally, the country’s perspectives are encouraging, the European Union forecasts a GDP growth of 5.1% in 2021, which sends a message of confidence and optimism to all industries, and especially to Romanian entrepreneurs and managers.

The Confidex study for Q4 2020, published by Impetum Group, which analyzed more than 700 companies with businesses worth more than 1 million euros, shows an increased attention given to digitalization, investments to increase productivity, but also to the implementation of telework by 50% – in the case of more than half of the companies.

According to the signals that we receive from the market, we are confident that in 2021 things will evolve differently, leading in a more positive direction compared to 2020 and also different from the way they unfolded before 2020. Prior to the onset of the pandemic, we operated with a series of premises and with a certain way of doing business that has been significantly changed in recent months. The new reality, that of the increasingly digital economy, can no longer be challenged by any organization that wants to exist and continue to be relevant in the market that it operates. We believe that the entire IT industry has gained a considerable advantage, as evidenced by the major interest of Romanian companies to access the digitalization funds provided by the government. From another perspective, the contribution of the IT industry to GDP has exceeded the threshold of 7% in 2020, which confirms previous projections. In the coming years, the IT&C industry is expected to contribute with over 10% to GDP.

We have seen in recent months how conversations with our customers have evolved from the idea of “survival” to the idea of “building in the new reality”, the interest in digital reinvention occupying practically most of the time. Customers are increasingly understanding that investing in technology is a unique opportunity to reinvent themselves and they rethink their plans and budgets for this opportunity.

Each step of digital maturity means better financial performance, the ability to achieve efficiency and operational control and a higher degree of client satisfaction. Therefore, as our customers’ financial results improve, we estimate that their interest will continue to grow, as will the adoption of new technologies.

Internally, an extremely important project started in 2020 and which we continue in 2021, is the rethinking of business processes and the modeling of IT platforms, in order to adapt to 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 collaborate with one supplier or another. We become aligned with our customers, we increase the value that we can bring to the table, while managing to improve the parameters of operational efficiency (conversion rates from prospects to customers and finally to loyal and recurring customers). Moreover, this approach allows us to attract new customers in a more structured way in the new business reality (“low touch economy”).

For example, more and more customers prefer to be informed in detail by doing individual research on the Internet understanding their problems, then identifying solutions and only in the last phase, interacting with a sales representative from suppliers, reducing the chance of an advisory sale but rather leaning towards a transactional approach that too often translates into fierce price competitiveness. Today, a sales opportunity appears in an area influenced by marketing and only the last step of the transaction involves human interaction. It is just an example that the way we will serve our customers from now on is fundamentally changing and all the organizational changes implemented internally in the last 6 months are in line with this new business reality.

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

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, support them, make sure we deliver what they want, and finally, 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, aiming at integration, automation, and the possibility to keep up “end-to-end” this market approach.

Starting from here, the changes spread to the marketing team on the adopted priorities and instruments but also to the business development team or even to the emergence of new and dedicated customer success teams.

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

Thus, we rethought the way we attract, recruit and onboard new colleagues so as to increase the degree of belonging to the business values we believe in. Using Equatorial’s extensive experience, we have started an internal management and leadership academy in 2021, based on which we will build key skills throughout the entire organization by offering career development paths to the best of our colleagues. Without a professionalized middle management structure, accelerated growth cannot be sustained.

The changes we mentioned about are intended to prepare the Bittnet group for the coming years and to support the vision of becoming a regional digitalization player for medium-sized companies in the CEE. During the event dedicated to investors (https://www.youtube.com/watch?v=h7u0H1VkL7Y), organized according to tradition on April 15, we talked extensively about the plans and priorities we have for each of the 2 divisions having with us the representatives of the companies in which we made the last investments – eLC, Softbinator, Servodata.

At the time of our transfer to the Main Market in June 2020, we promised our shareholders that the Bittnet Group will reach 100-million-euro turnover over the next 4 years and these ambitions are also based on M&A investments, not just organic growth. Hence, there has been increased activity in this area in the recent period.

During Q1 2021, we completed the investments in The e-Learning Company and Softbinator. We announced the first investment project in CEE in Servodata, which has been successfully operating in the Czech and Slovakian markets for over 25 years.

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, in which there are two unicorns, a wide range of talents and a significant percentage of users of digital services. We want to benefit as much as we can from this position, by accelerating M&A processes.

Together with our team of consultants we continue to carry out a sustained activity both locally and at the CEE level to identify organizations relevant to the communicated growth objectives and we hope that by the end of the second quarter we will be able to report new transactions.

For Bittnet, 2020 marked the end of a decade in which the company grew more than 50 times, becoming the market leader in the most of the segments in which it operates, but also the first IT company listed on the Bucharest Stock Exchange. As of June 2020, our shares are traded on the Main Market of the stock exchange and we are part of relevant indices such as BET-XT.

At the beginning of 2021, FTSE Russel announced the inclusion of BNET shares in two global micro-cap stock indices.

In Q1 2021, 27,577,422 BNET shares were traded by investors, which represents over 11% of the total number of shares. The total value of transfers in the last 12 months ended on 31.03.2021 exceeded 64 million lei (over 77 million traded shares).

The capitalization at the end of the reporting period grew to 172 million lei, increasing by 78% compared to 31.03.2020. Investors who subscribed in the capital increase carried out in Q1 2021, exercising the BNETR08 preference rights achieved a yield of 18%, considering the subscription price of 0.59 lei / new share (considering the fact that they did not trade the BNETR08 rights).

We are confident in the results we have presented today, both in comparison with previous years and in relation to the proposed targets for the whole 2021. As always, we remain open to receive your feedback or answer any questions at investors@bittnet.ro.