Rai Way S.p.A.

Good afternoon, this is the Corusco Conference Operator. Welcome and thank you for joining the RightWay 9-month 2023 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Giancarlo Benucci, Chief Corporate Development Officer of RightWay. Please, go ahead, sir.

Thank you, operator, and good afternoon. Let me start thanking you all for joining us today, and welcome to our nine-month 2023 results presentation. Today with me, Roberto Ciaccato, CEO, who will share the highlights for the period, and Adalberto Pellegrino, CFO, who will take you through the financial performance more in detail. At the end, we will open the line to your questions in the usual Q&A session. Let me therefore hand the call over to Roberto. Please, Roberto, go ahead.

Thanks, Giancarlo, and good afternoon to all of you. The third quarter, and more generally the second part of 2023, are proving to be intense in terms of activity and satisfying in terms of economic results. Starting with the latter, the quarter consolidated the growth trajectory already recorded in the first half. In particular, looking at the overall performance for the nine months, revenues are up about of a factor of 10.7%, mainly benefiting from the link to inflation and the contribution of regional farming. Excluding, as you will recall, the one-off proceeds from RAI of 2 million in third quarter 2022, growth would be of 12%. confirming the ability of our traditional business to deliver net of non-recurring growth in line with all above inflation factors. Adjusted EBITDA is traditionally very strong in the third quarter, with margin close to 70%, to be precise 69.9%. Driven by revenue growth and, let me underline, strong cost control, despite the inflationary dynamics of the recent times. When compared to nine months 2022, the 20% growth also benefits from lower energy tariffs, especially when compared to the last year's third quarter. Investment. Regarding investment, the maintenance component is broadly stable at around €7-8 million, while the development component is, for the time being, down on last year due to the sharp reduction in the farming portion. In 2023, activities are limited to the completion of inventories. but awaiting an acceleration of the diversification project, which we expect shortly based on the updates I will share in a moment. Let me emphasize once again the great capacity to generate cash with the recurring free cash flow to equity after leasing, financial charges, taxes, and maintenance capex, exceeding 90 million, basically matching in nine months the level reached in the entire 2022. From an operational perspective, besides confirming the usual good performance of our broadcast networks for RAI, but not only for RAI, also for the third parties, and the good hospitality dynamics shown in particular by some categories of customers, such as FWA and radio operators, I'd like to update you on a few fronts. First, what I consider to be a key milestone for the company's development path. The green light received by our board on the main diversification initiatives, namely data center and content delivery network. As you know, the company has already done a lot of setup work under the current plan, also including the permitting, the procurement, and some construction activities. But let me say that the vast majority of investment, potentially amounting to a few hundred millions, will fall within the time frame on the next industrial plan. Therefore, the full board support was not only appropriate, but necessary. This board decision, while confirming the direction taken, marks the shift from the setup phase to the major execution of what, along with other initiatives, will represent the expansion process of the next industrial plan. There are several elements appreciated by the Board. The supply-demand balance of target markets, expected returns and risk-reward. Analogies with our current infra-business, such as customer reliability and concentration, contract duration, marginality, and so on. Synergy with railway distributed assets and personnel on the territory. the size of the product, but high modularity of the investment, allowing the expenditure to follow the commercial take-up. In particular, as you can see on slide 6, a cap spent or committed so far, meaning contracts already signed, amounts to around $40 million. mostly devoted to the first set of each data center and partially to CDN. From here on, with further 10, 15 million, which more or less have closed to be signed, we expect to complete the startup phase, slightly increasing the number of major edge data centers and reaching a ready-to-service CDN. All the remaining capex related to this project, meaning up to additional 50 million for the densification of both the networks, shall follow demand. On top of that, the hyperscale data center project, once the authorization has been obtained, the minimum starting investment, let's say for half of the first module, meaning 4-5 MW, will be around 780 million. I repeat, we face the project with a strong modularity. All the additional investment for capacity expansion, more or less 10-12 million per MW, will follow the order intake. But of course, the permission and the capability is for the full potential of the site. Obviously, the focus of the board, and this is very important, has now switched to efficient rollout and successful commercialization, being aware that these projects have the cash profile of a typical infrastructure. This means that investment first, then progressive returns. In terms of recent operating progress, the CDN technology partner has been finally selected and contract awarded. Therefore, once the network interconnection has been completed and the first service installed, we will start with the testing phase. For the edge data center network, the construction of the first five data centers is broadly on track with the progressive completion between end of 2023 and beginning of 2024. The construction of the sixth asset in Rome has been awarded. And equally, if not more importantly, in parallel, we are starting the commercialization, receiving first expression of interest for capacity on a couple of locations. For the hyperscale data center in the Rome area, as you know, the authorization phase is underway, and we are constantly interacting with the municipality to make the process as smooth as possible. Needless to say, all of these projects will have a greater visibility in the new long-term industrial plan that we are developing just in these weeks. Along with these new infrastructures and, of course, the announcement of traditional business, In the plan, we are addressing how to better capitalize some existing assets, how to extend our positioning in the media supply chain, and how to improve operational efficiency and especially capital structure. The aim is to finalize and present the new plan and the targets in the first part of the next year most likely with the disclosure of the first year 2023 or first quarter 2024 results. Another recent achievement was the finalization of the new 185 million euros financing. Let me say that the appreciation for our development projects together with the standards of the business model and increasing recurring cash generation enable us to successfully refinance our credit lines. Compared to the previous one, the new three-year loan provides an incremental availability of funds with a limited cost increase in terms of spread, in particular if we consider the very different market conditions from three years ago. Alberto Pellegrino, the CFO, will provide more details in a while. But let me say that the major development projects net of the hyperscale data center, which due to the size will likely require an ad hoc financing, can be considered fully financed through the already valid debt and expected cash generation. But let me underline even preserving distribution to shareholders. Before bringing you through the financial results, I am glad to anticipate that, in light of the performance accrued in the first nine months, and the visibility of the coming weeks, we consider reasonable to slight increase the adjusted everyday growth expectation from mid-teens to high-teens. Moving now to some details of the 9 million financial performance of slide 6. You could see that the revenues are up of 10.7%, or, as I told before, more or less 12%, excluding the €2 million one-off amount paid by Ray in the third quarter of 2022, mainly driven by indexation to the inflation, growing contribution of the new regional Maxis business, and a positive hosting activity with FWA operators and radio broadcasters. Adjusted EBITDA reached €138.4 million, with a margin close to 68%, up approximately 20% over 2022, as a result of revenue growth and operating leverage. reduction of electric tariffs, reduction in energy consumption, and limited underlying increase in other costs. Consider that the reduction in energy consumption is a target that we are implementing in each kind of investment in the broadcast area that give us the opportunity to use new technology to decrease the energy consumption. The below-adjusted EBITDA, after taking into account non-recurring costs, the same already occurred in the first half, DNA and financial charts, net income rose at 24.1% to almost €70 million. On CapEx, as mentioned before, The development component is impacted by the substantial completion of refarming for Rai and third parties, which amounts to around $80 million in the nine months 2023, compared to the $30 million expenditures in 2022. Investment in other initiatives has more than doubled, and now we now expect further acceleration. The net financial position, including IFRS leasing, closed at €134 million. Cash conversion remained steadily above 90%, with the recurring free cash flow generation exceeding €90 million. And with this, let me say I hand over to Adalberto to provide you with details on the main items of our results and on the new financing that we have obtained. Please, Alberto, go ahead.