Gigas Hosting S A : Financial Results 1H 2023 presentation

Diego Cabezudo Javier Cañete

CEOCFO

H1 2023 Results Presentation for Investors

OCT 2023

gigas

Disclaimer

This document and the conference-call webcast (including the Q&A session) may contain forward-looking statements and information (hereinafter, the "Information") relating to GIGAS HOSTING S.A. or GIGAS GROUP (hereinafter "Gigas", the "Company" or the "Gigas Group"). This Information may include financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations that make reference to different matters, such as the customer base and its evolution, organic growth, potential acquisitions, Company's results and other aspects related to the activity and financial situation of the Company. The Information can be identified, in some cases, through the use of words such as "forecast", "expectation", "anticipation", "projection", "estimates", "plan" or similar expressions or variations of such expressions.

The Information reflects the current view of Gigas with respect to future events, and as such, do not represent any guarantee of future certain fulfilment, and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Information. These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Gigas, such as Annual Accounts or the Incorporation Memorandum (Sept. 2015).

Except as required by applicable law, Gigas does not assume any obligation to publicly update the Information to adapt it to events or circumstances taking place after the date of this presentation, including changes in the Company's strategy or any other circumstance.

This presentation and the conference-call webcast (including the Q&A session) contains or might contain non-audited financial information as prepared by Management. The information contained herein should therefore be considered as a whole and in conjunction with all the public information regarding the Company available, including any other documents released by the Company that may contain more detailed information. Neither this document nor the conference-call webcast (including the Q&A session) constitute an offer to purchase, sale or exchange any shares, a solicitation of any offer to purchase, sale or exchange of any shares, or a recommendation or advice regarding any shares.

2

H1 2023 Key Highlights

Net Revenues reached €33.3M in H1 2023, from €30.2M the previous year, 10.4% growth, although slightly below budget (-2,4%)

Gross Margin of €20.2M in H1 2023, 11.0%

• better than €18.2M of H1 2022, which represents 60.5% of revenues, better than 58.8% budgeted

Adj. EBITDA for the semester reached €8.1M, up

€ 5.7% YoY (€7.6M) and 4.6% higher than €7.7M budgeted for the first half of the year

€	New Debt structure signed with 7 banks up to
€60M and back-loaded amortizing to be ready
	for new stages of growth

CAPEX (excl. M&A and R&D) in H1 2023 reached €3.4M (10.2% of sales), lower than the same period in 2022 (€4.9M)

5

Business Evolution

• After launching all basic products (Data services, fixed voice, mobile voice, Cloud PBX, etc) and some convergent products (Kit Digital, Fibra Flexible, Private Cloud Connect, g-backup), team is now focused on replicating the SAP success with other ERPs and reinforcing its channel program
• New backup services have been launched and new security services also being defined.
• Conversations with Microsoft continue to establish a partnership and market a bundle of their solutions coupled with Gigas' solutions
• • Operator connect and direct peering in Spain and Portugal
  • Digital Business Pack: Microsoft 365 + g-Backup + Teams Voice (PSTN) + Private Connectivity
• Gross sales grew significantly in the first half of the year, driven partially by services provided to Wholesale in PT, some large projects and growth in Latam
• Mobile gross adds growing well (3K/mo.) and back to generating net growth (1.9K new lines in september), after a few months of mass port-outs due to market consolidation and competition
• New public administration large contracts won, but delays impacting revenues
• Latam growing very well and high demand for our SAP PaaS

4

Revenues H1 2023

• Net revenues grew to €33.3M in the first six months of the year, 10.4% higher than the €30.2M from same period last year, due mainly to the full consolidation of TPartner acquired in September 2022, although slightly below budget (2.4% lower)
• Customer looses from MM portfolio impacting this years' revenues significantly
• Telecommunications services represented 62.3% of total revenues while cloud and cybersecurity represented 37.7%

Half-Year Net Revenues

Revenue Distribution by Service

46.7%

Gross Margin and EBITDA H1 2023

• Gross Margin of €20.2M in H1 2023, 11.0% better than the €18.2M of H1 2022
• Gross Margin reached 60.5% of revenues, slightly better than the 60.2% of same period of last year, and much better than the 58.8% budgeted, due to higher growth in cloud services which enjoy higher margins than telco services
• Adjusted EBITDA reached €8.1M (before M&A costs, long term remuneration plans and other extraordinary), 5.7% higher than first 6 months last year (€7.7M)
• EBITDA margin was 24.3% over Revenues, below same period last year (25.4%) but significantly better than budgeted (22.6%). EBITDA improved from efficiency measures but also impacted from personnel cost increase and some operational costs

H1 Adj. EBITDA Evolution

46.6%

*Adjusted EBITDA represents recurring EBITDA excluding M&A related costs, multiyear remuneration plans and other non-recurring extraordinary expenses

H1 2023 RESULTS

GIGAS

	CONSOLIDATED RESULTS		REAL					REAL		REAL								REAL		REAL								Budget 2023
	Figures in euros		Q1 23					Q2 23		H1 23								% Var		H1 22								% Var		H1 23B
	Net Revenues		16.575.987					16.756.768		33.332.755						10,4%	30.183.889			-2,4%	34.156.604
	Cloud, IT & Cybersecurity Services		6.425.401	5.978.408		12.403.809	29,3%	9.595.523	-8,4%	13.545.884
	Telecommunications Services		9.915.597	10.560.617		20.476.214	-0,4%	20.565.373	1,6%	20.160.720
	Extraordinary Income, Subsidies & O.		234.990	217.742		452.732	1869,0%	22.993	0,6%	450.000
	Cost of Sales		(6.699.844)					(6.459.943)		(13.159.787)							9,6%		(12.006.775)			-6,5%		(14.071.301)
	Direct Product Costs		(5.920.454)	(5.668.503)		(11.588.957)	5,0%	(11.038.901)	-11,2%	(13.048.130)
	Operations and Technical costs		(779.390)	(791.440)		(1.570.830)	62,3%	(967.874)	53,5%	(1.023.171)
	Gross Margin		9.876.142					10.296.825		20.172.968							11,0%	18.177.114			0,4%	20.085.304
	Gross Margin %		59,6%	61,4%		60,5%									60,2%									58,8%
	Personnel Costs		(3.153.978)					(2.960.017)		(6.113.995)							11,6%		(5.477.362)			-9,5%		(6.757.337)
	Salaries and Social Security		(3.965.039)	(3.939.358)		(7.904.397)	17,9%	(6.704.673)	-0,6%	(7.952.898)
	Capitalised R&D		811.060		979.341		1.790.402		45,9%	1.227.310		49,8%	1.195.560
	Corporate Costs		(2.877.623)					(3.090.070)		(5.967.692)							18,3%		(5.044.083)			6,7%		(5.594.714)
	Customer Operations and Marketing		(816.916)	(847.680)		(1.664.596)	-6,7%	(1.783.572)	-21,8%	(2.129.848)
	Network, Operations and IT		(1.069.007)	(1.049.342)		(2.118.349)	38,2%	(1.533.339)	23,6%	(1.713.499)
	Other Corporate Costs		(991.700)	(1.193.047)		(2.184.747)	26,5%	(1.727.172)	24,7%	(1.751.367)
					-											-									-
	Adjusted EBITDA *		3.844.542					4.246.739		8.091.280							5,7%	7.655.668			4,6%	7.733.252
	Adjusted EBITDA %		23,2%	25,3%		24,3%									25,4%									22,6%
	Maintenance CAPEX (**)		451.085			703.110		1.154.196				-48,1%	2.222.636		-30,7%	1.665.284
	% over Revenues		2,7%	4,2%		3,5%									14,8%									9,8%
	EBITDA - Maintenance CAPEX		3.393.456				3.543.629		6.937.085					42,5%		4.868.795			14,3%		6.067.969
	% over Revenues		20,5%			21,1%		20,8%									32,1%									35,5%

*Adjusted EBITDA represents recurring EBITDA excluding M&A related costs and multiyear remuneration plans (stock options, etc.) **Maintenance CAPEX represents recurring investments to maintain existing infrastructures and current cloud capacity

2023 H1 P&L

• Loss of €1.9M in the semester due mainly to amortization of Customer Relations (over €1.5M) linked to acquisitions and, also, to financial expenses related to new debt financing and costs linked to cancellation debt, new fees and higher interest rate. (€1.1M)
• Without the amortization of the business combinations, and fees of new debt GIGAS would have had a profit in the period

The figures shown here in this P&L are an analytical view of the financials of the Company and therefore slight differences exist when compared to the statutory accounts due to certain reclassifications to better understand the business

CONSOLIDATED P&L	2023
Figures in euros									JAN-JUN
Net Revenues		33.332.755
Cloud, IT & Cybersecurity Services	12.403.809
Telecommunications Services	20.476.214
Extraodinary Income, Subsidies and Others	452.732
Cost of Sales		(13.159.787)
Direct Product Costs	(11.588.957)
Operations and Technical costs	(1.570.830)
Gross Margin		20.172.968
Gross Margin %	60,5%
Personnel Costs		(6.113.995)
Salaries and Social Security	(7.904.397)
Capitalised R&D	1.790.402
Corporate Costs		(5.967.692)
Customer Operations and Marketing	(1.664.596)
Network, Operations and IT	(2.118.349)
Other Corporate Costs	(2.184.747)
Adjusted EBITDA *		8.091.280
Adjusted EBITDA %		24,3%
M&A Costs, Stock Options, Long term rem.plan and Others	(995.301)
Depreciation and Amortization	(7.395.541)
Operating Profit (Loss) (EBIT)		(299.562)
Financel income	20.857
Finance costs	(2.130.220)
Exchange gains and others	(125.541)
Net Financial Result								(2.234.904)
Profit (Loss) Before Tax (EBT)		(2.534.466)
Income Tax	559.861

Profit or Loss from continuing operations		(1.974.605)
Profit (Loss) for the period		(1.974.605)

2023 H1 Balance Sheet

• Other Intangible Assets

represent the rights of use from long term network contracts at the Portuguese subsidiary (ONI)

• Customer relationships and Goodwill come from the M&A activity of the company and decrease over time through amortization, plus a downward adjustment made in one of the acquisitions
• Accounts Receivable has grown due to higher revenues but also strong commercial activity during H1
• Cash at hand has decreased €3.5M due mainly to optimization of disposals with new financing agreement.

		Limited review	Audited
Figures in Euros	30.06.2023	31.12.2022
NON-CURRENT ASSETS	130.058.721	131.119.649
Intangible assets	93.222.799	95.398.512
Research and development	69.294	442.945
Patents, licences, trademarks and similar righ	3.551.381	3.559.859
Software	1.532.521	1.503.709
Other intangible assets	19.888.622	20.137.887
Customer relations	24.272.118	25.845.249
Goodwill	43.908.863	43.908.863
Property, plant and equipment	26.174.740	25.216.218
Land and buildings	3.799.156	3.912.628
Technical installations and other items	18.515.180	18.345.638
Assets in development and advances	3.860.404	2.957.952
Non-current investments	70.900	70.779
Deferred tax assets	6.173.732	5.492.491
Leasing of premises	4.416.549	4.941.649
CURRENT ASSETS	29.634.470	29.869.918
Inventories and prepayments to suppliers	771.132	697.340
Trade and other receivables	16.852.206	14.087.077
Trade receivables	14.787.024	12.063.159
Other receivables and personnel	255.574	402.891
Current tax assets and Other tax payable	1.809.608	1.621.027
Current investments	23.389	24.884
Current accruals	1.825.306	1.365.033
Cash and cash equivalents	10.162.437	13.695.584

TOTAL ASSETS

159.693.191

160.989.567

2023 H1 Balance Sheet

• Equity reduced by €2.4M due to the losses of the period, linked mainly to customer relations amortization and the financial expenses debt restructuring
• Non current liabilities increased by €4.2M€, due to new debt signed during the first half of the year.
• Current liabilities decreased by €2.2M due to accounts payable decrease, linked mainly to lower capex in the period versus the same period last year

	Limited review	Audited
Figures in Euros	30.06.2023	31.12.2022
EQUITY	42.428.239	44.809.156
CAPITAL AND RESERVES	41.645.163	43.829.771
Capital	232.887	232.887
Share premium	54.325.581	54.325.581
Reserves	(900.536)	(900.536)
Treasury shares	(396.615)	(376.655)
Prior years' losses	(10.499.930)	(6.716.244)
Profit/(loss) for the year attributable to the Paren	(1.979.013)	(3.787.229)
Profit/(loss) attributable to non-controlling intere	4.408	4.293
Other equity instruments	858.381	1.047.674
EXCHANGE DIFFERENCES	(247.022)	(492.701)
GRANTS, DONATIONS AND BEQUESTS RECEIVED	1.017.957	1.464.238
NON-CONTROLLING INTERESTS	12.141	7.848
NON-CURRENT LIABILITIES	74.687.734	70.412.268
Non-current provisions	723.785	1.570.471
Non-current payables	64.441.293	58.857.907
Convertible bonds and debentures	2.602.912	2.490.475
Bank borrowings	36.869.590	27.231.957
Finance lease payables	3.041.078	3.668.156
Other finance lease payables (IRUs)	18.752.341	19.017.320
Other liabilities	3.175.372	6.450.000
Deferred tax liabilities	5.206.421	5.485.829
Non-current accruals	4.271.416	4.453.242
Other payables	44.819	44.819
CURRENT LIABILITIES	42.577.218	45.768.143
Current provisions	2.222.535	3.057.602
Current payables	13.474.850	15.855.250
Trade and other payables	24.388.738	24.807.378
Current accruals	2.491.095	2.047.913
TOTAL EQUITY AND LIABILITIES	159.693.191	160.989.567