Rai Way S.p.A.

Good evening, this is the Coruscant Conference Operator. Welcome and thank you for joining the Raiway First Hop 2025 Results Analyst Presentation. All participants are in listen-only mode and after the presentation there will be a Q&A session. At this time, I would like to turn the conference over to Mr. Andrea Moretti, Head of IR of Raiway. Please go ahead, sir.

Thank you, Operator, and good afternoon. Welcome, everybody, to our half-year financial results call. Today's speakers will be, as usual, our CEO, Roberto Cecatto, our CFO, Adalberto Pellegrino, and Giancarlo Venucci, our Chief Corporate Development Officer. Let's start with Mr. Cecatto. Please go ahead, sir.

Thank you, Andrea. Good afternoon to all of you. Let me start from positive news in terms of results that we are delivering. Revenues were up to 2%, accelerating from 1.7% performance in the first quarter, underpinned by both media distribution and digital infrastructure. Considering the CPI link contribution equal to 1.2%, the additional boost was provided by DAB coverage extension for RAI, rising tower hosting volumes, in particular from radio broadcaster, and the initial contribution from diversification initiatives. Adjusted EBITDA hit 96.3 million euros. up by 3%, also helped by some non-core items that Adalberto will cover in a while. Scrapping them at just every day underlining trend was in line with our expectation and full year guidance. providing for a constant growth in traditional business compensated by the startup operating expenses of diversification initiatives. Net profitability was in line with last year's ESWARE investments, but with a significant difference compared to the first semester of 2024. Out of 16.1 million euros capex in the first six months of 2025, the majority was represented by maintenance activities. Indeed, as anticipated during the last call, this year we are undergoing some extraordinary maintenance activities. And just to give you an example, in the Apulia region, we are investing 2.7 million, of which 1.5 already spent, on a crucial 70 years old transmission site in order to decommission two old transmission towers while building a brand new 120 meters high tower. one of the tallest and more modern railway has ever engineered. That we rationalize and renew one of our major infrastructural assets while enabling synergies and efficiencies and guaranteeing the continuity of the TV and radio content transmission in full security with higher quality standards. On top of that, the maintenance component of our CAPEX also reflects a phasing skewed in the first half of certain investment on the IP network. As for development component, the lower first half level reflects, first of all, the completion of the first phase of the rollout of diversification initiatives, and second, the current focus on marketing of the existing assets. And third, the design of new assets, in particular, the new edge data center in Bali, as well as also incorporated in the guidance, the slight shift to 2026 of certain activities related to various initiatives, mainly in the traditional business. Let me say that this must not be misunderstood. Our view of the markets we are investing in remains confirmed, as does the company commitment. Optimism and commitment are clearly reflected in our operational progress. In fact, in the last two, three years, the CDN market has experienced a very rapid evolution, also driven by consumption dynamics during the COVID period. In fact, after a phase of tremendous volume growth, followed by a period of traffic stabilization, but very high competition, The market is now approaching a new normal, let me say, with a more balanced supply and demand, and a more rational and stable progression in both volumes and price. On the one hand, this evolution has led to the acceleration of certain dynamics that we initially expected to be more gradual. But on the other hand, it has created a context in which, with decreasing competition, the performance and the quality of our solution can truly be a differentiating factor. To summarize, a more gradual growth curve, but with the same landing point in the long run and greater customer interest. Not surprisingly, from a commercial standpoint, we are reaching the players that we aim to reach. After a long trial period, which is normal for a newcomer, but let me say long trial, not so much long, because at the end is really a few months that we have the infrastructure already on running. Our network architecture, currently distributed across multiple distributed injection point and interconnected via a proprietary high-performance network, and the quality of our application partners have led to sign framework agreements with at least three of the main operators offering live streaming in Italy, with further negotiation underway. By allowing us to became one of the two, three CDNs used by each of these clients, these framework agreements will bring streaming traffic, that's revenues, on our network from now on. On the Azure Data Center side, we maintain the view of a growing regional leads of megawatt. today largely underserved or currently served from the Milan region due to the lack of high quality alternatives. Considering sites, location and features, our commercial sweet spot is represented by mid-size enterprise and digital players, which is exactly where we are focusing our efforts. In the region where we already operate, apart from Milan, that are Veneto, Liguria, Tuscany, Piedmont, and latter on parts of southern Italy, research estimates over 30 megawatts of additional demand in the coming years from this response. and we have to compare with 1-2 MW that we currently have available in the pipeline, with relatively limited competition. While receiving positive clients' feedback on proximity, quality, interconnection and national footprint, we keep working on few key points. particularly in terms of clients targeting, which might be consistent with the typical commercial footprint of an infrastructure company, and on the effectiveness on the go-to market. Apart from prescience, as many enterprise IT projects we see that have a long decision and implementation time, sometimes up to 12, 18 months, around half of the medium enterprise data center requirements originate from private cloud application application that luckily are largely channeled through system integrators and which we have chosen as our partners however system integrator integrated solution provided by private cloud operators who are the ones who ultimately decide where to place the servers. Therefore, this is an experience that we see in these past months of the approach in the market. So therefore, to avoid being disintermediated and better intercept this underlying demand, we are extending our offer to include IaaS services basically virtual machine for storage, and computing. Let me say still infrastructure-based, but with more value-added features. This solution became even more competitive. First, because when backed by a distributed interconnected network like ours, and second, when powered by smart, cost-effective software such as that of Cabit, an Italian cloud storage startup that will support our service under strategic business alliance. Going forward, we will therefore focus on expanding service range, growing partnership including private cloud players, and using our direct presence in a more targeted and effective way. Considering, on the other side, the hyperscale project, following the positive outcome of the so-called Conferenza dei Servizi, the last step is the signing of the concession with the municipalities, so the final authorization and the agreement with the municipalities. We have already finalized the draft document. Therefore, barring any unforeseen delays, we expect to sign the agreement within the next few weeks. Let me say, taking into consideration the upcoming summer breaks, let's say by September, more or less. Finally, putting us in the composition to move forward with the final design and procurement activities. But going now back to the numbers, I would also like to underline the financial performance resulting in the generation of more or less 63 millions in the semester. And let me say in line with the last year. The combined effect of free cash flow generation, investment activities, as well as the payout of dividends, drove our net debt at the end of June to around 178 million, which is less than our time our last 12 months every day. Looking ahead to the remainder of the year, we are pleased to rise our adjusted EBITDA guidance for the full year, together with the minor refacing of some investment that I mentioned earlier. But I will elaborate more on that at the end of this call. To conclude, I would also like to share a brief update on the analysis currently underway regarding the potential consolidation with data hours. To date, we have mainly worked on industrial aspects, and the activities are now progressing also on other relevant elements that you could easily imagine. Now it's time to deep dive in our first half of 2025 financial result, which will be discussed by our CFO. Please, Alberto, now the floor is yours.

Thank you, Roberto. Good afternoon to everyone. So I would skip to slide six to focus on core issues. Revenues where you may see that we have an increase of 2% reaching 140.3 million euro in the first six months of the year with both business lines on a positive trend. Media distribution increased by 1.8% more than CPI, whose contribution was more or less 1.2%. And the increase, the organic increase is due to the coverage extension of the RIDE-DUB network that gave us a positive impact in the first semester and that is included in the line new services to RIDE that increase up to 20%. And then we have also the first positive contribution from the commercialization of our CDN services. Regarding the digital infrastructure segment, revenues amounted 16.4 million euro, with a growth of 3.6%, mainly thanks to the tower hosting business. And in particular, we have seen very interesting volumes from volumes from radio broadcaster growing 50% up to 50% as well as also in this case the first positive contribution from the commercialization of our edge data center. Moving to OPEX, next page, page 7, we see an increase of 3.7%, landing at 14.9 million euro in the first six months. Breaking down the OPEX, personnel costs were up 10%, which drops to approximately 6% when excluding the capitalization that are lower compared to the previous year. The residual increase is due to the plan the planned growth of our workforce in line with the assumption of our industrial plan and also increasing the average cost per FT due to the impact of the renewal of the collective labor agreement and to other items. Other operating costs were down by 3.3%, positively affected by non-core benefits. Excluding these items, the underlying basis grew by approximately 2 million euros. driven by diversification initiative which contributed approximately 1.2 million euro higher energy tariffs adding more or less 0.7 million euro so we have a broadly stable stable level of our underlying cost basis in the traditional business all these we now we may move to the following slide the slide eight We see the adjusted EBITDA that reached 96.3 million euros with a 68.6 margin, impacted also by proceeds from asset sales that we have included in the line, other revenues and income. Slightly below, we highlight non-recurring costs, mainly related to M&A, as well as DNA, which confirmed the growing trend as the result of our development CAPEX, and financial charges that are improving vis-à-vis the last year figures due to lower interest rates. Net result amounted to 47.3 million euro in the first six months of the year. Moving to slide nine, let's have a look to our net debt as usual, including 40 million euro of IFRS leasing. Net debt close at 178 million euro, close to one time the adjusted EBITDA generated in the last 12 months. Compared to the end of 2024, the net debt increased by approximately 50 million euros, including, of course, the impact of the payment of our dividend, 89 million euros. With cash generation, therefore, remaining healthy and in line with the previous year, free cash flow to equity stands at 63 million euros in the first six months. So, as per the outlook, let me turn the floor back to our CEO. Please, Roberto.

Thanks, Adalberto. In terms of expectations for the full year, considering the trend and the results recorded in the first semester, we are now in a position to raise our profitability guidance for 2025 mainly to reflect more favorable electricity tariffs and higher non-core benefits compared to the initial expectation. Non-core benefits that, by the way, really never come for free but are actively targeted by the management to maintain the usual levels of growth despite the temporary impact of development initiatives. Excluding the non-core impacts and other factors not under company control, the underlining trends are overall confirmed with the progressive growth of traditional business, driven for example by contractual indexation, DAB coverage extension, rising tower hosting volumes, with radio broadcaster and so on. Partially offset by the already anticipated absorption from the startup phase of this diversification initiatives. As per the CAPEX, we confer the higher level of maintenance investment following some extraordinary activities such as the one that I mentioned before. while we now foresee a lower level of development capex compared to last year, when we spent around 40 million euros mainly investing in diversification projects. No doubt, we will keep on working on our main projects, such as DAB radio network expansion, the additional edge data center in the south of Italy, and the other internal projects. Therefore, as commented in my initial remarks, This update follows just a slight shift to 2026 of certain activities related to the various initiatives, mainly in the traditional business, in particular DAB radio and solar projects related. So that's all on our side. We can now open the line for the Q&A session. Thank you.

thank you this is the chorus conference operator who 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 the audio only please press star and one on your telephone the first question is from fabio pavan meteobanca please go ahead

Yes. Hi. Thank you for taking my two questions. The first one is on the potential sector consolidation. I was wondering if you can share with us some more details eventually on what are the activities run so far and the expected timeline for this process. And the second question is on hyperscale data center following the green light and so we had these expected signing of the concession. What are the next steps on this project? Thank you very much.

Concerning the consolidation, the extraordinary operation, consider that we are under a mountain of NDA and limits. So you could consider that I could give you some information, but not so much. Let me say that there is a large effort by all the parties involved, but especially railway. We have... work a lot on the industrial evaluation especially on synergies of course now we are progressing on the other aspect because the synergies are one of the items of course of this kind of analysis and review and The work is going on for sure. Considering timeline, let me say that the timeline, I could only say that the process also, as I mentioned in the past call, is quite complex. And so we have to spend a lot of efforts to overcome this complexity, let me say, But concerning the timeline, we cannot give particular information up to now. And also because there was a reference given by the shareholders that is public.

Ciao Fabio. On the hyperscale data centers, the steps that you recalled are correct. We expect to sign the concession with the municipality in the coming weeks, I would say. The draft concession has already been agreed, so there are now some formal steps. After that, And in particular, after having reached full visibility on timing, we will start on one side all the pre-marketing activities, also because any sort of pre-agreement will be, or some sort of soft agreement will be more than welcome also in terms of the risking. And then we will start also the final design and procurement activity. So now the focus is to finally close this I would say, never-ending authorization process.

Thank you. Fabio, let me add also that we spent a lot of effort, also thanks to our, let me say, institutional brand, to speed up a process that is really was really a nightmare. And the fact that we really are arriving at the final step, really the final step, I think that gives us a very good opportunity compared to any kind of other subject that would like to approach this kind of adventure in the region of the centre of Italy.

Thank you.

The next question is from Giorgio Tavolini in Termonte. Please go ahead.

Good evening. Thanks for taking my three questions, please. The first one is a follow-up on the M&A timeline. We appreciate that you can provide specific information at this stage on the timeline, but should respect a very definitive and, let me say, irrevocable go-no-go decision by when you will make this decision. And the second question is on the BDA guidance. I was wondering, you said clearly that non-core benefits do not come for free, but I was a little bit surprised to see the 1.5 million non-core benefits supporting the adjusted BDA performance. So I was wondering if you can clarify if the BDA upgrade will, of course, benefit or will be driven by the 1.5 million encore benefit booked in H1, or if the performance is pretty underlying, so stripping out this 1.5 million, And the third question is on the CDN and the Edge Data Center revenue breakdown. For this year, you guided during the first quarter call for around 1 million revenues. I don't know if it's fair to assume an equal split between the two initiatives. While looking forward to your business plan target of 10 million revenues by 2027, I was wondering if you can, let's say, give some indication on the mix. So it will be, let me say, 70% edge data center, 7 million or less. Thank you.

So let's start on the EBITDA guidance. The 1.5 million you mentioned was already embedded in our guidance. We have seen in the first half some additional impact, mainly impacting on other OPECs, as commented previously. So this is the one we are referring to. As concerns the CDN and EDGE data center guidance, yes, we mentioned in our last call the figures that you just reminded in your question. Giving some more details on these, yes, we may assume more or less half and half. Probably I would expect a little bit more from the CDN rather than on the edge data center.

Concerning the first question, as I mentioned, I cannot answer completely. You could understand, but in my opinion, there is no deadline, let me say. It's a process that is flowing. The work is progressing, but this is what we could confirm.

Okay, thank you.

The next question is from Andrea De Vita in Tiso San Paolo. Please go ahead.

Yes, hello to everybody. Very simple question on your level of investment. So, if it is volatility on maintenance capex and development cap. So just to understand in the second part of the year, whether we will have a maintenance capex more in the region of a single digit or low digit or a double digit and the same for a maintenance cap. So we have a like a very, very different difference and a very different levels for a FY 24 and would like to understand that the absolute likely number for FY25 if it's possible.

Okay, so as concern our maintenance cap is in fact this semester we had high figures compared also to the past, but this is nothing impacting the overall figures we expect to have at the end of the year. Simply we have some activities that we finalize in advance, keeping in mind that our overall guidance for the present year is an increasing trend but this trend will be exactly consistent with the trend of our of our business plan that as you remember uh had an increase in the mid-year of our industrial plan to go back at the end of the plan at 6.5%. So, all in all, for sure, the first half figures confirm the fact that we will go above the previous year figures, but this is something that should be consistent with the trend of our industrial plan that includes some non-recurring activities. As overall guidance, you should assume 6.5% of our revenues, of our core revenues on the long term.

6.5% is the mid-term average.

6.5% is the long-term value. We should consider on top of this in... 2025 into 2026, an additional more or less 15, 20 million euro of additional extraordinary and non-recurring capex that we will have to put in place as presented in our industrial plan.

Andrea, just to be very clear on one point, you mentioned long-term target, the 6.5%. I mean, it's not a long-term target in the sense that it's something that we need to reach through efficiencies or other. It's the usual average level of maintenance capex that we have in our business, around 6.5%. The only difference in this plan is that this year and next year, we are booking some extraordinary activity. But the usual, let me say, run rate, recurring level was, is, and will be around 6%.

Just to understand whether the extraordinary portion was, let's say, concentrated in Q2, or if we will have a tail in Q4, Q4, Q4.

No, we had an impact in the first half, but it's quite limited. We should expect some other capex, extraordinary capex in the second half. But this is something that should impact mainly 2026 figures.

And the same for the development cap. So I understand this is to do with the delays and postponement for hyperscale. But just to understand the likely ballpark figure for H2 this year.

Actually, the delay in the development capex level in 2025, as we commented on the guidance, is related not to the IP scale initiatives, but to some other development initiatives in relation to the photovoltaic project, in relation to the edge data center, in relation to some activities with some key customer on the tower rental. So the IP scale is something that was included in our industrial plan starting from 2026. Just to spend a few words on this, considering the timeline we just commented, we believe that the amount of capex that we included in our business plan for the construction of the IP scale, of the first part, of course, of the IP scale, amounting approximately 76, 77 million euro, and that at the time we plan to finalize in 2026 and 2027, Because of this timeline, we expect to have the majority of this capex in 2027. We could have some delay, but limited in 2028. But I'd say the majority should impact 2027 figures.

To give you an example related to this shift of the hyperscale, consider that we already have the order ready to dismantling two antennas that are antenna towers that are in the site of the future hyperscale data center, some building that we are ready to activate as we finalize as told in the next weeks, maybe before September, more or less, to start the real operation of the upper scale. Of course, we have all the activity ready to start, but we need, of course, the permission to go on.

So just to understand that, You had the 40 million development capital last year. We had a few millions in H1. Are we going to have 10, 20, or 30 million by year-end? I suppose you have some number in mind that you can share with us.

Sure. No, no. We expect the reduction will be not significant. We're not talking about 10 or 20 million euros. Our development capex are still expected to be... I would say we could have a decrease vis-a-vis 2024 figures of 20%, 25% just to give you an idea of the magnitude. Thank you very much. You're welcome.

The next question is from Milo Silvestre. Equita, please go ahead.

Good afternoon, everybody. Two questions from my side. The first one concerns follow-up on Edge Data Center and CDN as well. So if you can elaborate on the target for the full year, if you are still assuming 1 million euros of revenues. And the second one on Hyperscaler, the target set by the business plan is to have it on operation by 2027.

and so if you can elaborate on that timing and if you think that is still achievable thank you on the on the data center actually we talk on the overall diversification initiative that we include in the overall diversity diversification project are We would expect to reach at least one million euro, as commented also to give an answer to a previous question. So is an overall guidance on both CDN and edge data center. On the IP scale, Revenue timing, actually, in our industrial plan, we really had a very, very limited impact in 2027. So even if, as I mentioned before, we could have a slight delay starting the activity in 2028, to be clear, there is no significant impact on our industrial plant. Grazie. You're welcome.

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 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. I turn the conference back to you for any closing remarks.

That's fine. Thank you. Thank you, operator. Thank you all. We just wish you a happy summer holidays. Goodbye.

Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your devices.