OTHER RELEVANT INFORMATION
NOTIFICATION OF H1 2024 EARNINGS AND BUSINESS
INDICATORS
GIGAS HOSTING, S.A.
29 September 2024
Pursuant to article 17 of EU Market Abuse Regulation (596/2014) and article 227 of the Law 6/2023 of 17 March on Securities Markets and Investment Services (Ley 6/2023, de 17 de marzo) and related provisions, and Circular 3/2020 of the BME Growth Segment of BME MTF Equity (the "BME Growth" segment) on information to be provided by companies admitted to trading in the BME Growth segment of BME MTF Equity, the following disclosure contains relevant information on GIGAS HOSTING, S.A. and its subsidiaries ("GIGAS", "GIGAS Group", the "Group", or the "Company") in relation to the interim consolidated financial performance for the six months ended 30 June 2024.
The information contained in this Other Relevant Information disclosure was prepared by the Company as consolidated earnings of GIGAS HOSTING S.A. and subsidiaries for the first half of 2024 based on the accounting and financial information available to the Company. The results were subject to a limited review by the Company's statutory auditor, Ernst&Young S.L., and duly authorised for issue by the Board of Directors of Gigas at its meeting of 26 September 2024, with the favourable vote of all its members.
Attached to the Inside Information disclosure, as required by Circular 3/2020, are the following documents:
- Interim consolidated financial statements and notes to the interim consolidated financial statements of GIGAS HOSTING, S.A. and subsidiaries for the six months ended 30 June 2024, together with the unqualified Limited Review report of the Company's auditor, Ernst & Young S.L.
- Separate financial statements of GIGAS HOSTING, S.A. (balance sheet and income statement) for the six months ended 30 June 2024.
SUMMARY OF SIGNIFICANT INFORMATION
- The Company achieved substantial earnings growth in the period, driven primarily by robust organic expansion across its core markets. Net revenue in the first six months of 2024 amounted to EUR 37.4 million (including the recognition of EUR 479 thousand of grants received for a cybersecurity project financed with European Funds), up 12.2% year- on-year (from EUR 33.3 million in H1 2023). Excluding the contribution from Alterlinks, acquired on 31 October 2023, organic revenue growth compared to the same period last year was nearly 11%.
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- Cloud services remained the Company's primary growth driver and top priority, with revenue surging 22.6% year-on-year. This segment accounted for 41.2% of total revenue, significantly surpassing the 37.7% reported in H1 2023. Telecommunications services revenue grew by 6.1%, outpacing the sector average and accounting for 58.8% of total revenue. However, its share in the revenue mix declined from 62.3% in the same period last year.
- The Company is prioritising the expansion of its faster-growing,higher-margin cloud services business, with two key strategic focuses: Enterprise Resource Planning (ERP) cloud hosting and growth in Public Cloud and managed services. The SAP hosting services business continued to deliver robust growth, above all in Latin America. Meanwhile, Gigas also went to great lengths in recent months to replicate the success of its platform-as-a- service for SAP with other ERP systems available in the market. This strategic initiative is starting to pay off, as the Company acquired approximately 500 ERP customers (excluding SAP) in the year's first half, leaving it poised for strong cloud revenue growth in the coming months.
- Regarding its second strategic focus, the Company is accelerating growth in Public Cloud services by entering into strategic partnership agreements with Google and Microsoft. These partnerships are further enhanced by the Company's managed services offerings. These new business lines are already helping to drive the growth of the cloud segment. However, this expansion requires investment in both skilled personnel and commercial initiatives, which will have a short-term impact on the Company's profitability in terms of EBITDA but pave the way for sustained growth in the future.
- Lastly, mobile telephone adds are experiencing rapid growth despite market consolidation and stiff competition, although the margins commanded by this business are thin.
- Gross margin in the first six months of 2024 totalled EUR 22.0 million, up 8.9% from EUR 20.2 million in H1 2023. For cloud services, the gross margin improved to 68.8% of cloud revenue during the period, despite rising direct product costs largely driven by inflation in data center rental services and electricity prices. The gross margin for telecommunications services contracted to 50.7%, primarily due to changes in the product mix, competitive pressure, and price erosion within the sector. Overall, gross margin came to 58.7% of revenue in H1 2024, slightly below last year's 60.5%.
- Personnel and similar costs rose to EUR 7.3 million from EUR 6.1 million in H1 2023, driven by wage inflation in the sector, increased employee benefits expense in Spain, and the costs of new hires in technical and operational roles to support the Company's strategic areas (ERP systems and Public Cloud). These investments and the pursuit of service excellence should contribute to margin expansion and churn reduction moving forward.
- Other corporate costs amounted to EUR 6.1 million, broadly in line with last year's EUR 6.0 million despite the strong increase in sales, reflecting the operational leverage of the business.
- The Group reported adjusted EBITDA (i.e., excluding costs of EUR 201 thousand related M&A, EUR 178 thousand to multiyear remuneration plans and EUR 186 thousand of other extraordinary costs) of EUR 8.6 million in the first half of 2024, up 6.4% year-on-year (from EUR 8.09 million). The adjusted EBITDA/revenue ratio for H1 2024 was 23.0%, slightly down from last year's 24.3%. This decline was primarily due to increased personnel costs associated with the commitment to growth in strategic areas, as noted, as well as the contraction in the gross margin of telecommunications services
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- NOTE: Adjusted EBITDA excludes costs of M&A, multiyear remuneration plans and other extraordinary items.
- Amortisation and depreciation charges for the period totalled EUR 7.87 million, representing a considerable increase from EUR 7.39 million in the same period last year. This was primarily the result of the inclusion of Alterlinks in the Group's scope of consolidation at the end of 2023.
- In the first half of 2023, the Company entered into a 5-year syndicated financing facility with seven banks for up to EUR 60 million (see Inside Information disclosure of 20 April 2023), providing it with proceeds to replace its entire amount of existing borrowings and with new financing facilities to grow both organically and inorganically over the next few years.
- Finance costs in H1 2024 amounted to EUR 3.14 million, up from EUR 2.13 million in H1 2023. This was primarily the result of higher interest rates. Thanks to higher finance income, net finance expense grew less than finance costs, amounting to EUR 2.78 million compared to EUR 2.23 million in the same period last year.
- The Company reported a net loss for the first half of EUR 2.8 million compared to EUR 1.97 million last year, with the increase primarily caused by higher amortisation and depreciation charges (which did not imply cash outflows in the period) and growth in the Group's finance costs, as noted above.
- Gross financial debt at 30 June 2024 stood at EUR 60.7 million. This figure excluded EUR 2.8 million of convertible bonds (see Inside Information disclosure of 26 April 2018) expected to be converted into shares at maturity in April 2025 since they are in the money and EUR 26.5 million of finance leases arising from long-term contracts (mostly between five and 30 years) for right-of-use assets involving data center, telecommunications and other infrastructures (recognised in liabilities under "Lease liabilities, other infrastructure -
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IRUs" and "Other operating liabilities), along with leases of premises, points of presence or edge data centers and offices converted to IFRS for EUR 5.8 million. The balance of gross financial debt was up slightly from EUR 57.1 million at 31 December 2023.
GIGAS HOSTING, S.A. and Subsidiaries | Limited Review | Audited |
Figures in euros | ||
30.06.2024 | 31.12.2023 | |
NON-CURRENT ASSETS | 131,979,959 | 133,137,045 |
Intangible assets | 91,161,217 | 90,875,474 |
Research and development | 438,134 | 504,731 |
Patents, licences, trademarks and similar rights | 4,602,833 | 4,955,743 |
Computer software | 1,682,393 | 1,656,250 |
Other intangible assets | 7,077,749 | 4,778,245 |
Customer relations | 21,031,321 | 22,651,719 |
Goodwill | 56,328,786 | 56,328,786 |
Property, plant and equipment | 28,764,631 | 29,515,075 |
Land and buildings | 3,680,713 | 3,813,139 |
Technical installations and other property, plant and equipment | 23,772,465 | 22,740,297 |
Assets in development and advances | 1,311,453 | 2,961,640 |
Non-current investments | 69,050 | 62,817 |
Deferred tax assets | 6,739,484 | 6,601,563 |
Rights to use leased premises | 5,245,578 | 6,082,115 |
CURRENT ASSETS | 39,467,417 | 38,927,402 |
Inventories | 1,101,987 | 1,077,119 |
Trade and other receivables | 18,446,148 | 13,948,983 |
Trade receivables | 17,390,525 | 13,052,831 |
Other receivables and receivables from employees | 1,055,623 | 896,151 |
Current tax assets | 947,758 | 851,772 |
Other tax receivables | 2,004,938 | 1,617,285 |
Current financial assets | 21,762 | 21,738 |
Derivatives | - | 334,197 |
Current accruals | 2,005,931 | 1,774,440 |
Cash and cash equivalents | 14,938,893 | 19,301,869 |
TOTAL ASSETS | 171,447,376 | 172,064,447 |
GIGAS HOSTING, S.A. and Subsidiaries | Limited review | Audited |
Figures in euros | ||
30.06.2024 | 31.12.2023 | |
EQUITY | 35,784,075 | 38,703,571 |
CAPITAL AND RESERVES | 36,454,462 | 39,256,393 |
Capital | 232,887 | 232,887 |
Share premium | 54,325,581 | 54,325,581 |
Reserves | (702,447) | (702,447) |
Treasury shares | (364,788) | (351,930) |
Prior years' losses | (15,046,000) | (10,168,580) |
Profit/(loss) for the year attributable to the parent | (2,814,155) | (4,877,420) |
Profit/(loss) attributable to non-controlling interests | - | (1,474) |
Other equity instruments | 823,384 | 799,777 |
EXCHANGE DIFFERENCES | (407,935) | (52,034) |
VALUATION ADJUSTMENTS | (262,452) | (512,928) |
NON-CONTROLLING INTERESTS | - | 12,140 |
NON-CURRENT LIABILITIES | 89,181,193 | 92,823,196 |
Deferred income | 80,070 | 540,365 |
Non-current provisions | 7,266,738 | 7,579,411 |
Non-current payables | 56,280,129 | 59,255,051 |
Convertible bonds and debentures | - | 2,721,369 |
Financial debt | 46,788,751 | 44,150,193 |
Vendor loans (inorganic growth) | - | 3,187,686 |
Lease payables | 3,686,948 | 4,853,926 |
Lease liabilities, other infrastructure - IRUs | 5,804,430 | 4,341,877 |
Other operating liabilities | 16,370,781 | 15,506,126 |
Derivatives | 315,444 | 683,905 |
Deferred tax liabilities | 4,731,197 | 5,175,639 |
Non-current accruals | 4,136,834 | 4,082,700 |
CURRENT LIABILITIES | 46,482,109 | 40,537,682 |
Current provisions | 2,829,754 | 2,939,424 |
Current payables | 19,756,528 | 14,052,474 |
Other operating liabilities | 1,518,224 | 1,625,285 |
Trade and other payables | 17,925,774 | 18,484,250 |
Current tax liabilities | 332,038 | 126,061 |
Other tax payables | 1,351,874 | 1,145,905 |
Current accruals | 2,767,916 | 2,164,283 |
TOTAL EQUITY AND LIABILITIES | 171,447,377 | 172,064,448 |
- The Company ended the year's first half with a cash position of EUR 14.9. Therefore, net financial debt at 30 June 2024 amounted to EUR 45.8 million; i.e., 2.6x adjusted EBITDA estimated for the full year.
- Acquisitions of property plant and equipment and intangible assets in the first six months of 2024 totalled EUR 5.1 million (or 13.8% of revenue), excluding capitalised R&D. Maintenance CAPEX amounted to EUR 1.4 million and growth CAPEX to EUR 3.7 million, mostly resulting from the expansion of cloud capacity (EUR 0.9 million), installations at customers (EUR 1.0 million), telecommunications technology upgrades (EUR 0.6 million) and R&D projects (EUR 0.5 million).
- EBITDA less maintenance CAPEX in the first half this year was EUR 7.2 million, above the EUR 6.9 million reported for the same period last year.
The Company issued guidance for FY 2024 for its key business metrics at the beginning of the year (see Other Relevant Information notice of 10 April 2024), estimating revenue of EUR 70.4 million and adjusted EBITDA of EUR 17.6 million. After the solid set of earnings in the first half of the year, which easily outperformed its original expectations, Gigas is now estimating approximately EUR 74-75 million of net revenue this year, much higher than budgeted. It expects adjusted EBITDA to either be in line with or slightly above budget despite the required investment in new capabilities to cater to the growth in Public Cloud services and ERP hosting.
The Company is currently assessing a number of potential M&A opportunities in Europe and Latin America, focusing on the strategic cloud areas of ERP hosting and managed services, and Public Cloud. These deals would further accelerate the Group's organic growth.
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Overall, the Company is highly satisfied with the strong growth trajectory it has set this year and remains upbeat about its future prospects, driven by high-growth and value-added services. The reported figures for H1 2024 are a testament to the efforts made in recent months within the Company's strategic areas, which are anticipated to drive future growth and unlock significant business opportunities.
The Company has scheduled a webinar on its earnings, during which the CEO and CFO will provide more details on the numbers presented in this document. Eligible to attend are all investors, analysts and anyone else interested, who can follow the presentation on-line and ask questions:
H1 2024 EARNINGS PRESENTATION WEBINAR
DATE AND TIME: Thursday, 3 October 2024, 11:00 AM
LINK TO REGISTER: https://gigas.com/ResultadosGigas/2024H1
Alcobendas, Madrid, 29 September 2024,
Diego Cabezudo Fernández de la Vega
Chief Executive Officer
GIGAS HOSTING, S.A.
NOTE: The figures shown herein are taken from the Company's interim financial statements for the six months ended 30 June 2024, included as an APPENDIX. In the event of any discrepancies, the interim financial statements shall prevail.
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