Rai Way S.p.A.

operator welcome and thank you for joining the right way first quarter 2025 results analyst web call all participants are on listen only mode and after the presentation there will be a q a session at this time i would like to turn a conference over to mr andrea moretti head of ir of railway please go ahead sir thank you maria good evening and welcome to everyone

As we presented our yearly results and 2025 guidance less than two months ago, today's presentation will be relatively short and focused on the Q&A. As usual, today's speakers will be Raiways CEO, Roberto Cecatto, the CFO, Adalberto Pellegrino, and Giancarlo Benucci, Chief Corporate Development Officer. Let's first start with a financial and operational overview of the quarter. Please, Mr. Cecatto, the floor is yours.

Good evening to everyone, from me as well. Starting with the financial result, which will be explained in detail by our CFO, Adalberto Pellegrino. The trends and the driver observed in the first quarter are fully in line with expectation in particular. At revenue level, we continue to maintain an inertial CPI plus growth profile. The growth exceeding CPI came from rising tower hosting volumes driven by radio broadcaster fixed wireless access providers and public administration. The first marginal contribution also came from diversification. EBITDA remained flat, even considering the solid underlying operating leverage and profitability of the traditional business. This was due to some items. Diversification-related costs in line with the expectation and full year guidance as well as to higher energy tariffs Caraplex levels were low, both for maintenance due to the typical seasonality of the first quarter and for development reflecting the negotiation phase for DAB projects and the completion of the first phase of the new project rollouts. In the quarter with no dividend payment, low capex and low maintenance activity, Free cash flow generation is typically high and reached €22 million. From an operational standpoint, even though only two months have passed since our last update, I'd like to take a moment to share a few developments that are interesting. Talking about the diversification after a long period of testing, we have entered into negotiation with some major content providers to use that away CDN to distribute video traffic across Italy under framework agreements. In one case, a discussion at really at an advantage stage. and consider that in a market already served by other players, relevant players and solutions, reaching this stage of discussion with certain parties seems to confirm the distinctive features and value proposition of Railway, as we identified from the very beginning. From a traditional business perspective, after the already announced finalization of the contract with Dry, We are starting activities for the significant expansion of DRB network, which will keep us busy in the coming year. At the same time, as clearly shown by our quarterly results, the usual market trends and the focus on operational efficiency remain confirmed. I am also happy to announce that in mid-April the relocation of our headquarters to the new offices in Rome was completed, Let me say that this will contribute to strengthen our corporate identity, better communicating our brand and enhancing the quality and the productivity of our employees. Last but not least, as it is well known, during the quarter, the industrial analysis regarding a potential merger with data hours have been initiated and activities are currently progressing. the quarterly financial result and operational progress as Arlo has to confirm the expectation for 2025, which I will reiterate in more detail at the end of the presentation. But before this, our CFO will go through a much detailed overview of the result. Please, Alberto, go ahead.

Thank you, Roberto, and good afternoon to everyone. We are now on page five, which provides an overview of the financial results for the first quarter of 2025. I would skip it and go straight to the details of each metric as usual. So let's see together slide six that show the trend of core revenue, which increased by 1.7% to 70 million euros. One year after introducing the new business line breakdown aligned with the industrial plan view, starting this quarter, we are continuing the previous customer base classification in our financial communication. In any case, please consider that the contribution of Rai to Raiway's total turnover was around 84% in the quarter. Starting with the media distribution segments, revenues increased by 1.6%, reaching €61.9 million. The additional growth beyond the CPI that was equal to 1.2% is mainly due to non-core debt. Regarding the digital infrastructure segment, revenues amounted to 8.1 million euros. The segment marked a 2.5% increase, mainly driven by the growing contribution from radio broadcasters, fixed wireless access providers, and public administration, as well as the first results from the commercialization of edge data centers. The recorded increase rise to 3.1% when excluding non-recurring items, typically prior year adjustment that last year were higher than this year. Let's move to slide 7 on OPEX. We see a 4.4% increase in the overall cost of railway landing and Breaking down the OPEX, personnel costs were up 8.3%, which drops to approximately 4% when excluding capitalization costs. Such an increase was due to reinforcement in the workforce perfectly in line with the assumption that we included in our industrial plan. Other operating costs remained essentially flat, 10.5 million euro, despite increasing costs related to the launch of the diversification initiative and the higher energy cost. both offset by one of non-recurring items in any way in a context of constant monitoring of the company's cost base slide eight we recap as usual the profit and loss till the net net income and we may see that The dynamics just described translate into an almost flat adjusted EBITDA at 46.9 million euro. Slightly below, we underline the DNA, which keeps its growth trend quarter stable. By quarter, following the increase in capex connected to diversification and to development initiatives on the core business. As concerned the financial charge in Q1 2025, thanks to the central bank cuts, the cost of our debt is lower than the amount recorded in the last year, first quarter. including an equally flat tax rate, net income, as we have seen in the previous slide, came in at 22.6 million euro, down 5.3% quarter on quarter, perfectly in line with the trend already envisaged in the industrial plan we have approved in 2024. Let's finally move to slide nine, where our financial performance is represented. You all know that in the first quarter of each year, right-weight typically generate cash because the dividend outflows take place in the following quarter, in May. Moreover, capex activity is typically weak in the first three months of each year. And this quarter is perfectly in line with this trend, showing also capex amounting 4 million euro, and also considering another typical absorption of working capital for almost 14 million euro, The net debt at the end of March reached €116 million, compared to €128 million at the end of 2024, bringing the leverage ratio to 0.6 times. I'll now hand it back to Roberto for the guidance and final remarks. Please, Roberto.

Thank you, Roberto. We are now on page 10. As anticipated, the guidance for the full year provided in March remains valid. In the last months, energy prices have proven to be still quite volatile. In the first quarter, we also recorded some additional non-recurring benefits, but overall, nothing measured to change today the positive outlook already shared with you. Therefore, we guide for the usual activities healthy underlying growth of our traditional business mostly compensated at just a bda level by two effects slightly higher expected energy tariff and the higher dilutive impact on a bdta on the diversification initiatives in line with the assumption of the industrial plan in particular First, in the media distribution segment, the right fixed consideration will benefit from CPI leak, while other components will be supported by the DAB coverage extension and rising GDN contribution. In the digital infrastructure segment, we expect the CPI plus grow with the plus coming from data center rising contribution. On the OPEX side, the increase will be largely related to the diversification initiatives, while on the traditional businesses, the inflation will be modest and mainly due to electricity tariffs. On the CAPEX side, maintenance CAPEX level will be a few million euros above the normalized level of 6-7% of sales due to some extraordinary and non-recurring activities. The development CAPEX are respected broadly in line with last year and mainly devoted to DAP rollout and diversification. So let me say that the guidance is there, and I think that now it's now time to answer to your question, and thank you for your attention.

Thank you. We will now begin the question and answer session. To enter the queue for questions, please click on the Q&A icon on the left side of your screen. When announced, please click continue on the pop-up window. If you are connected in audio only, please press star and one on your telephone. The first question is from Giorgio Tavolini of Intermonte. Please go ahead.

Hi, good evening. Thanks for taking my questions. The first one is if you can provide an update on the commercialization of edge data centers. In Q4, you talked about multi-year revenue backlog of around 6 million. So I was wondering if there was any relevant update on this front. The second question is on consolidation. Actually, we got a very encouraging update from EI Towers regarding their harmonization of the perimeter of the activity. So they extended their perimeter to the ownership of the active equipment. So I was wondering if it was somehow a precondition for considering a potential merger. And the second question is that now that the two perimeters of the master service agreements are aligned, I was wondering if you see any remaining differences worth to be fixed, such as, for example, the contract duration. Now your contract expires in 2028, the contract expires in 2032. So there is a space for an harmonization on that side, and probably also on the CPI link I was wondering if you have any thoughts on that front.

Thank you. Ciao, Giorgio.

I keep the one on the data centers commercialization. Let's say that our commercial activity keeps on growing in terms of offering, so proposal, and in terms of creating a result Basically, we explained the dynamics of the market during the last presentation and the direction has not changed as of today. We are also looking for some, let's say, solution to accelerate a little bit the decision-making process of smaller customers but the like uh introducing some yes services that goes slightly beyond collocation but generally speaking there are no major changes and and the the commercialization is going on considering the question to address regarding the consolidation

Let me say that from what we have read, it seems that the model is evolving towards ours as we hone the active equipment used by RAI. So this makes the scope of the business even more comparable. But let me say the perimeter that we know are anyway different. To give you an example, we are managing all the radio management of the network, including site and active equipment. And this is presumably different between the other part. So this is the answer that I could give you. Considering the other point, let me say that we are not in the condition, of course, to answer to your question. Let me say that the analysis are ongoing, and as we already said, the focus is particularly on industrial aspect and synergy.

Very clear. Thank you very much.

The next question is from Milo Silvestre of Equitasim.

Yes, good afternoon everybody. Just two questions. The first one concerns hyperscaler data center, so if you can elaborate more on that and if you have received all the authorizations that you are waiting for. And the second one is a follow-up on the edge data center, so if you have, let's say, a target in mind that in terms of revenues.

Thank you for the question. Let me address the hybrid scale story. We have Some good news, because let me say that this week just received the positive completion of the, in Italy we call, conferenza di servizi, that is a milestone in the authorization process. So it's another good step. but you know that the bureaucracy in Italy is pervasive, and so we would like to wait for the next steps, maybe easier, but one milestone was the closing and the positive closing of the Conferenza di Servizi we just completed last week. So I will address this issue when we will have really the final permission to start to build.

As concern your second question, I would refer to our diversification initiatives of both EDGE and CDN In the year of the service launch, 2024, we made hundreds of thousands of euros. In 2025, we expect to go above 1 million, but in any case, I would not focus on the accounting value of our revenues in 2025. What will be key is to work in order to close contracts with a positive impact on the following year. So the overall yearly value of the contract that we will sign that is clearly key in order to guarantee the growth of our top line consistently with the trend of our industrial plant.

Grazie mille. You're welcome. Prego.

As a reminder, if you wish to register for a question, please click on the Q&A icon on the left side of your screen or press star and one on your telephone. For any further questions, please click the Q&A icon on the left side of your screen or starting one on your telephone. The next question is from Andrea Belloli of Banca Acros.

Yeah, thank you for taking my question. Good afternoon, everybody. Andrea from Banca Acros. We just started the coverage yesterday. Just a quick one on OPEX. If understood well, higher energy tariffs impacted for a 1.1 million additional costs in Q1, but I see that other operating costs remain flat year over year, and I was wondering if you can give us more color about eventual efficiencies that there has been in other costs. Thank you.

It's high. So as concerned the OPEX, yes. Basically, we have an impact on the energy cost of approximately 1 million quarter on quarter, that's correct, as well as an increasing trend, of course, of the OPEX related to the diversification initiatives. All these The negative impact on our OPEX has been basically offset by some one-off that we had, prior year adjustment, higher than the value recorded in the first quarter 2024. This is the most important impact. Then we also have a few hundred euros of impact coming from our focus on cost cutting and, generally speaking, on control on our cost basis. And this is the overall impact of all this trend is basically neutral when you see the other OPEX overall figures.

Okay, clear. Thank you.

The next question is a follow-up from Giorgio Tavolini of Intermonte.

Just a follow-up on the energy prices. I was wondering if you concern your assumption on the energy prices for 2025. In your Q4 presentation, you were assuming 125 euros per megawatt hour. megawatt hour. I don't know if it's still the case or you are seeing rising energy prices when excluding the spread and green energy option and so on and so forth. Thank you.

Broadly speaking, we are more or less in line with the amount that you just mentioned.

Okay, thank you.

For any further questions, please click on the Q&A icon on the left side of your screen or star and one on your telephone. Gentlemen, there are no more questions registered at this time.

It's fine. Thank you, operator, and thank you all attendees. We look forward to seeing you in our brand new headquarters whenever you travel to Rome and wish you a pleasant evening. Thank you. Goodbye.

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