Gigas Hosting S A : Financial Results H1 2023

OTHER RELEVANT INFORMATION

NOTIFICATION OF H1 2023 EARNINGS AND BUSINESS

INDICATORS

GIGAS HOSTING, S.A.

11 October 2023

Pursuant to article 17 of EU Market Abuse Regulation (596/2014) and article 227 of Law 6/2023 of 17 March on Securities Markets and Investment Services (Ley 6/2023, de 17 de marzo) and related provisions, and Circular 3/2020 of the BME Growth Segment of BME MTF Equity (the "BME Growth" segment) on information to be provided by companies admitted to trading in the BME Growth segment of BME MTF Equity, the following disclosure contains relevant information on GIGAS HOSTING, S.A. and its subsidiaries ("GIGAS", the "GIGAS Group", the "Group", or the "Company") in relation to the interim consolidated financial performance for the six months ended 30 June 2023 and the variance in financial metrics from the budget included in the Inside Information disclosure published on 7 February 2023.

The information contained in this Other Relevant Information disclosure was prepared by the Company as consolidated earnings of GIGAS HOSTING S.A. and subsidiaries for the first half of 2023 based on the accounting and financial information available to the Company. The results were subject to a limited review by the Company's statutory auditor, Ernst&Young S.L., and duly authorised for issue by the Board of Directors of Gigas at its meeting of 4 October 2023, with the favourable vote of all its members.

Attached to the Inside Information disclosure, as required by Circular 3/2020, are the following documents:

1. Interim consolidated financial statements and notes to the interim consolidated financial statements of GIGAS HOSTING, S.A. and subsidiaries for the six months ended 30 June 2023, together with the unqualified Limited Review report of the Company's auditor, Ernst & Young S.L.
2. Separate financial statements of GIGAS HOSTING, S.A. (balance sheet and income statement) for the six months ended 30 June 2023.

SUMMARY OF SIGNIFICANT INFORMATION

• The Company reported significantly higher numbers due to the consolidation of TPartner, a unified communications solutions provider acquired in September 2022 (see Inside Information disclosure of 29 September 2022), as well as to organic business growth. Net revenue in the first six months of 2023 amounted to EUR 33.33 million (including the recognition of EUR 453 thousand of grants received for a cybersecurity project financed

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with European Funds), up 10.4% year-on-year (from EUR 30.18 million in H1 2022) but 2.4% below the EUR 30.18 million budgeted for the period.

• GIGAS also reported adjusted EBITDA (i.e. excluding costs of multiyear remuneration plans and M&A and other extraordinary items) in H1 2023 of EUR 8.09 million, an increase of 5.7% year-on-year from EUR 7.66 million in H1 2022 and 4.6% above the EUR 7.73 million budgeted. Therefore, the Company underperformed the budget slightly in top-line revenue but outperformed at EBITDA level, thus improving its profitability.
• The Group's leverage at the end of the first half stood at 2.23x net financial debt/annual EBITDA as planned in the budget, with EUR 10.38 million of cash.

NOTE: * EBITDA excludes costs of M&A, multiyear remuneration plans and other extraordinary items.

• After launching its core telecommunications products (e.g. data services, fixed voice, mobile voice, cloud PBX), in line with its strategy of being a one-stop shop for customers, as well as some convergent products (Digital Kit, Flexible Fibre, Private Cloud Connect, g-

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backup), the Company worked on replicating the success of its platform-as-a-service for SAP with other ERPs (business management or Enterprise Resource Planning software) available in the market and strengthening its indirect business model in a bid to provide greater tools and benefits to its partners and help them to market telecommunications, cloud and cybersecurity solutions that are heavily demanded by small and medium-sized enterprises (SMEs). By bolstering its indirect sales channel, GIGAS ensures that its commercial strategy is scalable and can reach customers who trust in regional and local integrators for their technology services.

• Aware of the increasing threat of ransomware or similar cyberattacks, the Company continued its work on developing new backup copy services, including a new type of immutable backup service for protecting backup copies from potential encryption.
• Mobile telephone adds are in a stage of rapid growth and made a positive net contribution to growth after a few months of stagnation and slight declines amid market consolidation and stiff competition.
• The Company won several contracts to provide services to the public administration spanning several years. It should begin rolling these out over the coming months, which bodes well for growth in the latter part of this year and the next few years.

DETAILED FINANCIAL DISCLOSURES AND BUDGET VARIANCE

NOTE: * EBITDA excludes costs of M&A, multiyear remuneration plans and other extraordinary items.

H1 2022 figures shown herein were converted to IFRS for comparison with H1 2023 and therefore do not coincide with those reported last year.

• Net revenue in the first six months of 2023 amounted to EUR 33.33 million, slightly under budget (-2.4%) but well above the year-earlier figure of EUR 30.18 million (+10.4%). Cloud, IT & Cybersecurity Services accounted for 37.7% of revenue in the period, up from 31.8% last year, thanks to the consolidation in 2023 of the revenue contributed by TPartner, which was acquired in September 2022, and to growth in cloud services.

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Telecommunications services made up the remaining 62.3% of total revenue, implying a reduction in its relative weight of business generation. Cloud services revenue was lower in the second quarter than the first, which featured non-recurring revenue from special one-off cloud and cybersecurity projects invoiced during that quarter. Telecommunications revenue was higher in Q2 2023, helped by certain projects of large enterprises.

• Gross margin totalled EUR 20.17 million in the first six months of 2023, up 11% from EUR 18.18 million in H1 2022; i.e. slightly outstripping growth in revenue. As a result, gross margin came to 60.5% of revenue in H1 2023, slightly above last year's 60.2% and well above the 58.8% budgeted, thanks to the growth of the cloud business, which commands wider margins than telecommunications.
• Personnel and similar costs increased to EUR 6.11 million, driven by the addition of staff from TPartner and inflation-induced wage increases, but this was less than the EUR 6.76 million budgeted. Not included are costs arising from stock options and other long-term remuneration plans, which totalled EUR 607 thousand in the six-month period (2022: EUR 313 thousand).
• Corporate costs rose by 18.3% year-on-year in H1 2023 to EUR 5.97 million owing to the inclusion of costs of TPartner and the costs of the voice and data platforms rolled out last year both to migrate telecommunications customers in Spain and to provide new services.
• Adjusted EBITDA through June 2023 totalled EUR 8.09 million, up 5.7% on the year-earlier figure (EUR 7.65 million) and 4.6% over the EUR 7.73 million budgeted thanks to the improvement in gross margin and the improvements in personnel cost items thanks to greater synergies and a smoother-than-expected integration of acquisitions. Figures for 2022 were affected by the renegotiation of certain wholesale contracts with retrospective effect, which resulted in considerable improvement in both gross margin and EBITDA in 2022. Therefore, like-for-like growth in 2023 figures was better than the reported increases.
• Adjusted EBITDA does not include costs of multiyear incentive programmes (EUR 607 thousand in the period) of costs of M&A and other extraordinary items (EUR 388 thousand).
• The adjusted EBITDA ratio for H1 2023 was 24.3%, just under last year's 25.4% but comfortably above the 22.6% budgeted.
• The amortisation and depreciation charge in the period was EUR 7.39 million, marking a considerable increase from the year-earlier figure of EUR 6.57 thousand. This was primarily the result of the amortisation of customer relations arising from the acquisition of TPartner, the depreciation charge of long-term rights to use telecom infrastructure (IRUs or indefeasable rights of use) in Portugal, and the depreciation charge arising from the conversion of lease contracts to IFRS.
• In the first half of the year, the Company entered into a 5-year syndicated financing facility with seven banks for up to EUR 60 million (see Inside Information disclosure of 20 April 2023), providing it with proceeds to replace its entire amount of existing borrowings and with new financing facilities to grow both organically and inorganically over the next few years.
• Finance costs in H1 2023 totalled EUR 2.13 thousand, up from EUR 1.31 thousand in the first half of 2022. The increase was mostly due to the costs of arranging the syndicated financing described above, including the costs assumed for cancelling bank borrowings, fees and expenses related to the new transactions, and a higher finance cost on the debt than in the first half of 2022.
• The Company reported a loss for the period of EUR 1.97 million compared to a loss last year of EUR 1.38 million. The increase was largely the result of the amortisation of customer

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relations (EUR 1.57 million in H1 2023) and the finance costs related to the cancellation of existing debt and arrangement of new borrowings (EUR 1.5 million), which combined amounted to EUR 3.07 million. Stripping out these effects, the Group would have delivered a profit before tax in the first half of the year.

• Gross debt, excluding EUR 2.6 million of convertible bonds (see Inside Information disclosure of 26 April 2018) expected to be converted into shares at maturity and EUR
• 1. million of finance leases arising from contracts for rights to use datacentre and telecommunications infrastructure assets (recognised in liabilities under "Lease liabilities, other infrastructure - IRUs), along with leases of premises and offices converted to IFRS for EUR 4.31 million, stood at EUR 48.97 million at 30 June 2023, up from EUR 45.64 at 31 December 2022.
• The Company ended the period with EUR 10.38 of cash and EUR 38.59 million of net financial debt; i.e. 2.23x budgeted adjusted EBITDA for the year.
• Acquisitions of property plant and equipment and intangible assets in the first six months of 2023 amounted to EUR 3.82 million (or 10.2% of revenue), excluding capitalised R&D (EUR 1.79 million). This was below the EUR 5.00 million included in the budget. Maintenance CAPEX in the period amounted to EUR 1.15 million and growth CAPEX to EUR
• 1. million.
• EBITDA less maintenance CAPEX in the first half this year was EUR 6.94, well above the EUR 4.85 million reported for the same period last year.

• Lastly, the Company has submitted several projects for NextGenerationEU funding. This year, it has been awarded a EUR 1.0 million non-repayable grant by Spain's National Cybersecurity Institute (Instituto Nacional de Ciberseguridad de España or INCIBE) to develop a cybersecurity solution for detecting and protecting against network security

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