Sesa SpA

MIL:SES

Q1-2026 Earnings Call

[Operator]

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Full Year 2026 Consolidated 3 Months Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Jacopo Laschetti, Stakeholder and Corporate Sustainability Manager of SeSa. Please go ahead, sir.

[Jacopo Laschetti, executive]

Good morning, and thank you for joining the SeSa Group presentation. Representing the group today are Alessandro Fabbroni, Group CEO; Caterina Gori, Investor Relations and Corporate Finance and M&A Manager; and myself, Stakeholder Relations and Head of Sustainability.

Earlier today, the Board of Directors approved the consolidated financial results for the first quarter of fiscal year 2026 ended July 13, 2025 (sic) [ July 31, 2025 ]. The corporate presentation is available on the SeSa website and will serve as a reference throughout today's conference call.

Alessandro will begin by providing an overview of our key business developments and achievements.

[Alessandro Fabbroni, executive]

Good morning, and thank you all for joining today's call. In the first quarter of the new fiscal year, SeSa returned to growth, confirming the achievability of the guidance of the new industrial plan. Overall, first quarter 2026 shows a solid recovery in consolidated revenues and EBITDA, along with a significant improvement in net profitability, supported by a substantial reduction in financial expenses and the improvement of the net financial position compared to April 30, '25, with a clear and progressive reversal of the main trends of revenues and profitability.

In the first quarter, on a consolidated basis, the group recorded revenues for EUR 846 million, up 8%, and EBITDA of EUR 61 million, up 7.2% year-on-year, and an adjusted net profit for EUR 29.8 million, up 6.4% year-on-year, with an adjusted group net profit equal to EUR 27.9 million, up by 4.5% year-on-year. The trend in [ human ] people shows 6,593 employees as of July 2025, with a moderate growth up 0.9% compared to April 30, '25, in line with our target of growing operating efficiency of the new industrial plan.

On organic basis, revenues increased by 2.2% year-on-year, EBITDA by 4% year-on-year and adjusted group net profit by 2.3% year-on-year compared with the pro forma figures as of July '24, restated to include the quarterly results of Greensun, company acquired last November '24.

Consolidated revenues by sector show a positive trend compared with fourth quarter '25. ICT VAS, with revenues for EUR 497 million, down 2.7%, entirely organic, showing progressive recovery from the 8.2% decline in fourth quarter '25, with return to growth expected from second quarter 2026, following the double-digit increase in the July and August 2025 backlog.

Digital Green VAS, with revenues for EUR 111 million, up 24.7% year-on-year, driven by 20% organic growth and strong business demand, supported by rising energy needs related to digitalization and the high adoption.

Software and System Integration sector with revenues for EUR 220 million, up 2.8% year-on-year despite a slower demand in some key Made in Italy districts and the re-engineering activities in some business units.

And finally, Business Services sector, with revenues for EUR 37 million, up by 3.0% year-on-year, which continues to grow entirely organically, supported by the increasing focus on digital platforms and vertical applications, and the expected acceleration in upcoming quarters, thanks to new agreements with some major Italian banks.

Consolidated EBITDA increased by 7.2% year-on-year, reaching EUR 61 million, up 4% versus the pro forma figures, and driven by the 20% growth of Green VAS and Business Services sector, while the ICT VAS and Software System Integration sector remained broadly stable year-on-year.

ICT VAS achieved an EBITDA of EUR 22.2 million, down 0.9% year-on-year, with an EBITDA margin equals to 4.5% as of July '25, up from 4.4% as of July '24. Digital Green VAS reported an EBITDA of EUR 6.2 million, up 18% year-on-year, with an EBITDA margin of 5.6% as of July '25, slightly down from 5.9% as of July '24.

Software and System Integration sector achieved an EBITDA of EUR 23.5 million, down 2.7% year-on-year, with an EBITDA margin equals to 10.7% as of July '25 compared to 10.8% in the full year '25. This reflects the re-engineering operations in some business units, with EBITDA margin expected to stabilize in full year '26, the same level of the full year '25.

Business Services reported an EBITDA equals to EUR 7.3 million, up by 25% year-on-year, with an EBITDA margin of 20%, driven by the progressive focus of revenues on proprietary digital platforms and vertical applications developed over the past 2 years. Adjusted consolidated EBIT was equal to EUR 47.3 million, up 4.2% year-on-year after depreciation and amortization of tangible and intangible assets equals to EUR 12.7 million, up 15% year-on-year and provisions for around EUR 0.7 million.

As expected, in the new industrial plan, net financial position show a significant reduction equals to 12% compared to first quarter '25 and equals to 36% compared to fourth quarter '25, driven by lower interest rates and efficiency measures in group financial management.

The first quarter adjusted consolidated net profit was equal to EUR 29.8 million, up 6.4% year-on-year, reflecting stronger operating profitability and a reduction in financial expenses. The adjusted group consolidated net profit reached EUR 28 million, up 4.5% year-on-year and up by 2.3% versus the pro forma figures as of July '24.

Finally, consolidated report in that financial position as of July 2025 equals to a net debt for EUR 65 million shows a significant improvement compared to EUR 75 million as of April 30, '25, thanks to operating cash flow in the quarter and lower investment compared to the previous year, with CapEx and M&A equal to approximately EUR 11.5 million in first quarter '26 alone.

Now I'll give the floor to Caterina to present our new strategy in terms of M&A and the main resolution of the last shareholders' meeting held on August 27, 2025.

[Caterina Gori, executive]

After years of significant M&A investments, our new FY 2026, 2027 industrial plan marks a strategic shift, focusing on group simplification and organic growth. We will leverage the capabilities and business model we have built over the years to drive sustainable growth, supported by dedicated CapEx in AI and automation to enhance efficiency, scalability and market penetration. As a result, annual M&A investments are projected to decline to around EUR 30 million, guided by a selective value-driven strategy, while CapEx is expected to remain at approximately EUR 50 million per year.

In the first quarter of FY '26, we further strengthened our international presence through only 2 strategic acquisitions, with total investments of approximately EUR 7 million. Visicon GmbH in Germany, an SAP consulting specialist, with EUR 5.3 million in revenues; and [ Delta Informaciones], Spain, an AI-driven player in digital identity with EUR 2 million in revenues. Both companies delivered EBITDA margin above 10%. These acquisitions confirm our strategy, a selective approach to high-value M&A in Europe, combined with strong investments in digital transformation areas such as AI, automation and digital platform.

As outlined in 2026-2027 industrial plan, we are focused on generating strong cash flow and delivering solid returns to our shareholders, as demonstrated by our last shareholder meeting on August 27, 2025, where we approved a dividend of EUR 1 per share in line with the previous year, a significant increase in the share buyback program from EUR 10 million in FY '25 to EUR 25 million for the coming year, almost 3x the previous amount to further enhance the shareholder value by increasing the payout ratio from 30% of the last year to 40% of the current year. We have already started the program the day following its approval, underlining our commitment to create sustainable value for our shareholders. Then the cancellation of treasury shares up to a maximum of 2% of SeSa share capital over the next 18 months. As of August 27, 2025, approximately 1% of shares had already been canceled.

I now invite Jacopo to present our ECG (sic) [ ESG ] results for the first quarter of FY '26.

[Jacopo Laschetti, executive]

Good morning, and thank you, Caterina. In terms of sustainability path, in light of the new CSRD regulations and the new ESG standards, we confirm our strong commitment to value generation for our stakeholders, and we continue to invest in sustainability and environmental protection, supporting intensively our customers to be responsible on the management of natural resources. By the way, our Digital Green sector contributes significantly to reduce overall CO2 emissions, thanks to our leadership position, which allows to improve the sustainability profile and performance of our partners.

In line with our ESG growth path, our sustainability plan for 2026 and 2027 defines priorities, targets and specific actions to integrate sustainability in our business model, contributing to the creation of long-term value for stakeholders. On this point, our last results were characterized by a significant improvement in ESG performance and the achievement of some relevant sustainable development goals set.

We reinforced our group purpose that confirm our corporate values and goals of long-term sustainable value creation for the benefit of all stakeholders. Digital innovation, long-term value creation, sustainability and digitalization continues to be the core pillars of our strategy, defining the group's purpose. We also continue to extend our main group certification, confirming all of our ESG ratings.

In terms of HR management, we are facing a consolidation phase with an increasing focus on work and collaboration efficiency and the progressive integration of digital enablers in our organization and the way we work. After big improvement of our human capital over the last 4 years, in the first quarter of the new fiscal year, we increased the headcount by 0.9% only, in line with our strategic industrial plan. We continue to work to further improve our loyalty rate, reinforcing at the same time our education, hiring and welfare programs with wider and specific measure to support parenting, diversity, well-being and work-life balancing, thanks to dedicated programs in favor of diversity and inclusion.

Now I give the floor again to Alessandro for the final conclusions.

[Alessandro Fabbroni, executive]

Thank you, Caterina and Jacopo. I will now share the final remarks and conclude our session. Three months ago, we presented our new industrial plan, aiming at group's transformation by focusing on organic growth of our core businesses, organization streamlined, growing operating efficiency and market penetration by reinforcing our role as a leading digital integrator and partner of customers' digital transformation.

In the first quarter of '26, we worked strongly to deliver the main strategic targets of the industrial plan, driving organic growth across the group sectors, streamlining legal entities and adopting AI and digital enablers to boost operating efficiency.

In particular, in the first quarter of FY '26, we achieved a 25% growth in profitability of Business Services sector, driven by the expanding market penetration of our proprietary digital platforms and vertical applications developed over the past 2 years, a double-digit organic growth in both revenues and EBITDA for the Digital Green VAS sector, fueled by strong business demand and rising energy needs driven by digitalization and AI adoption, recovery in ICT VAS trend compared to fourth quarter '25 with a double-digit backlog growth in the month of July and August '25, supporting an expected return to a year-on-year growth from the second quarter '26. And we also achieved a significant reduction in the net financial expenses, down 36% compared to fourth quarter '25, and down by 12% compared to first quarter '25, reflecting the ongoing recovery trend, supported by lower market interest rates and the efficiency measures implemented during FY '25.

Thanks to our strategy, we strengthened our position as a leading digital integrator with a strong focus on cybersecurity, AI, automation, vertical application and digital platforms. And at the same time, our Business Services sector continued to grow in the financial services industry, driven by rising demand for specialized vertical platforms and applications.

In the light of our first quarter 2026 strategic achievements and the disciplined way we have been executing the new industrial plan, today we confirm our commitment to deliver all growth targets that we have outlined last July for the new FY '26. This means a 5% to 7.5% growth in revenues, a 5% to 10% increase in EBITDA, and about 10% improvement in net consolidated profit, confirming that we are on track to achieve the main value generation targets for our shareholders.

Considering the positive trend of our net financial position improving by around EUR 10 million compared to April 30, '25, we are delivering the planned 40% payout ratio compared to the 30% of the previous year by executing the new EUR 25 million buyback program approved by our last shareholders' meeting. Now we will continue to execute the new industrial plan with strong discipline, focusing on organic growth, operating efficiency, the adoption of digital enablers and inspired by a corporate vision oriented towards sustainable growth and digital innovation.

Thank you very much for your kind attention. Now we open the Q&A session.

[Operator]

[Operator Instructions] The first question is from Andrea Randone, Intermonte.

[Andrea Randone, analyst]

My question is about the outlook you provided for the business segments. We can see that Digital Green is performing slightly ahead or I can say, ahead of initial expectations, while maybe Software and System Integration is a bit softer. So my questions are, what is the visibility you have on the most recent months? And if you can provide some indication on the full year profitability you are expecting compared to what we have seen in the first quarter? And any further comment on this -- the expected evolution of the business segment is welcome.

[Alessandro Fabbroni, executive]

Andrea, thank you for the questions. So first of all, the trend of business segment is characterized by growing focus on proprietary digital platform. So that means, as a result, growing level of EBITDA margin that we achieved record 19.9% of revenues. So we grew by 3% in terms of revenue. We expect to accelerate the trend of revenues, considering also several main contracts that we won during the first quarter that we will account starting from the second quarter. So our guidance continues to be a double-digit growth in terms of revenues and in particular, in terms of profitability.

In the Digital Green, we capitalized the great effort we did in the last quarter. So the merger between PM Service and Greensun created a leading player in Italian market. We increased our market share in the business segment. There is a great demand of energy for renewable sources, considering the low prices that stabilized. So the trend of prices were stable in the quarter. So the lower level that we achieved over the past 1.5 years made very competitive the green energy solution, and there's a great demand from corporate organization in that direction. So the trend of the market is a trend of high single-digit growth, and we plan to be able to perform to continue to grow double digit, thanks to our competitive advantages and our market share we achieved in the Italian market.

The situation of the Software and System Integration in the quarter characterized by a recovery of EBITDA marginality in comparison to the fourth quarter because we performed with a 10.7% compared to 10.2%. We expect to stabilize this level around 10.8%, 11%. And so to start increase also in terms of EBITDA quarter-by-quarter. So our feeling is that the first quarter of that fiscal year was the most difficult to face because we are in the beginning of the industrial plan, but the actions that we perform, we will disclose most of their effect in the upcoming quarters. So that is the reason that we confirm the consolidated guidance for the whole group with a visibility level that increased a lot compared to 3 months ago.

[Operator]

[Operator Instructions] The next question is from Gabriele Berti, Intesa Sanpaolo.

[Gabriele Berti, analyst]

First question on CapEx, considering you mentioned a shift in the CapEx mix used from M&A and internal development, where do you see CapEx in this fiscal year? And how much will be dedicated to internal development? And if you could also provide some color on which kind of projects are you developing?

And then second question, if you could elaborate on the driver behind the acceleration in the backlog for the VAS segment?

[Alessandro Fabbroni, executive]

Gabriele, thank you for the question. Yes, in terms of CapEx, including M&A investment, we have around EUR 11.5 million in the first quarter, of which EUR 7 million M&A. So that means we are more or less on track because our full year indication is an indication of EUR 75 million, EUR 80 million, of which EUR 30 million, EUR 35 million dedicated to selected M&A. So the internal development refer mainly the so-called digital enablers adoption. It means AI automation and also the development of digital platforms and vertical application for penetrating the market and also for our organization.

In terms of trend of ICT VAS, first of all, we closed the quarter with an upturn in comparison to the trend of the fourth quarter. So we declined 2.5% compared to a decline of 8%. But in particular, we closed the quarter with very, very positive trend in the backlog. The backlog increased by over than 10% in July, over than 10% in August with a good start in September. And so considering also the trend we had in the previous year, now we expect to recover a positive increase in revenues starting from the second quarter.

I remember that our indication for the full year is to grow low single digit in terms of revenues and EBITDA and double-digit in terms of profitability. And in fact, in the first quarter, we increased in terms of net profitability in this sector by around 17%. So that means we are on track not only in terms of trend of revenues and EBITDA, but in particular also in terms of profitability and net income.

[Operator]

The next question is from Guy Breeden, Quilter Cheviot. Mr. Breeden, your line is open. Maybe your line is on mute? Unfortunately, we cannot hear you. Could you please open up your line? Maybe you are muted?

[Operator Instructions] The next question is from [ Paolo Cipriani ], a private investor.

[Unknown Shareholder]

Alessandro, can you hear me well?

[Alessandro Fabbroni, executive]

Yes, very well, yes.

[Unknown Shareholder]

Yes. I have a question regarding the financial expenses that are improving and should be expected to improve further. Could you just maybe help me to understand whether a bit more just to say something a bit more on what they are related to. I mean just are they, for example, related to the acquisition of the previous small companies acquired in the previous years, I mean, related to the working capital management of these companies? And maybe just say something about the full effect of cost optimization initiatives that seems to improve these financial charges?

[Alessandro Fabbroni, executive]

Thank you for the question. So first of all, we are capitalizing 2 main factors. The first one is the lower level of interest rates. I remember that in any case, we will benefit in a progressive way because several financial costs are accounted for in advance for 3, 6 months. And so we will benefit moving forward. The second one is obviously the improvement that we are achieving in working capital management and also in several other measures that we are introducing starting from 1 year.

So the lower number of legal entities, the adoption of cash flow and obviously planning and, generally speaking, the identification of planning and several targets for any group's legal entity. So the start of the fiscal year was positive because of the comparison with the previous year in terms of first quarter 2025 was a comparison with an improvement by 12%. But if we compare the first quarter '26 with the fourth quarter '25, we improved by 35%. So that is the reason we expect to accelerate in our progressive improvement quarter-by-quarter.

[Operator]

[Operator Instructions] Gentlemen, Mr. Laschetti, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

[Jacopo Laschetti, executive]

Thank you very much. As usual, we stay available for any additional information, and thank you very much for your participation.

[Operator]

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