THE INTERNET PLATFORM OF THE EMERGING MARKETS OF EUROPE. Investor presentation: April 2018

Transcription

1 THE INTERNET PLATFORM OF THE EMERGING MARKETS OF EUROPE Investor presentation: April 2018

2 AGENDA Overview Growth strategy People and Cap-table Other information Structure and organization Financials Stock and valuation 2

3 OVERVIEW 3

4 ABOUT US Dominion Hosting Holding ( DHH ) is an industrial investment company focused on Web hosting, SaaS and cloud-computing industry with the goal of creating the leading Internet Platform of European emerging markets, a geographic area where expected growth rates are higher thanks to current lower digital penetration. DHH is listed on AIM Italia, a Multilateral Trading Facility regulated by Borsa Italiana and registered as a SME Growth Market. 4

5 CORE BUSINESS AND BUSINESS MODEL So far DHH has focused its investments on Web domain name registration / transfer and on Web hosting products (from simple share hosting products to more sophisticated solutions as virtual private server, cloud and managed hosting services). New verticals of the basic Web services / cloud computing space should be added in the next future. Most of the above-mentioned services are supplied trough cloud based Software as a service (SaaS) technicality, with a one-to-many model where contracted customers are charged in advance for their subscription 5

6 MAIN FEATURES Eight brands under management, with ca. 100 thousand customers and 200 thousand registered domains in five promising countries: Croatia, Italy, Serbia, Slovenia and Switzerland In-depth and proven capabilities of turning around and up-scaling acquired assets (10 acquisitions between 2015 and 2018, 5 acquisitions after the IPO that took place back in July 2016) Fast growing company (FY17 Revenues +34% YoY) with a well-balanced financial structure, (positive net cash position of 2.5mn as of 2017 Year-End) and sound Cash Flow generation (EBITDA to OpFCF conversion ratio in the 100% region) 6

7 MARKET OPPORTUNITY Reference market is rapidly growing and evolving, highlighting double-digit growth rates expected in the next years both in the traditional Web hosting and Cloud computing markets (Source: Market Research Future, July 2017 and Gartner technology research, October 2017), with global shared hosting industry expected to reach a market size of $21.1bn by 2019 (Source: Statista) European emerging digital markets are one step behind with regard to internet use and are expected to post higher than average growth rates ahead (Source: European Commission, Digital Agenda Scoreboard 2017) 7

8 Market Opportunity DHH, gaining a leadership position in these markets would like to take advantage of the robust growth trend already in place due to fill the gap with more mature geographies These unusual geographies can also be seen as experimental markets to test and launch scalable digital businesses internationally, thanks to the amount of talents available in these areas at very competitive costs with respect to more developed markets 8

9 HISTORICAL MILESTONES Since its foundation the company has finalized several investments while successfully IPOing onto AIM Italia stock market: November 2015 Acquisition of Tophost S.r.l., leading low-cost Italian web hosting player September 2016 Acquisition of the Croatian company Infonet which fully owns Hosting IT, a young web hosting provider May 2017 Acquisition of 60% of Bee Bee Web (together with its Italian reseller Hosting Star), a Swiss based web hosting company, owner of the brand Artera, whose products are addressed to professional users October 2015 Acquisition of Klaro, a Slovenian web agency which in turn fully controlled the entire corporate capital of Domenca, Domovanje, Plus HR and Plus RS July 2016 Successful IPO on the Italian AIM stock market, raising 4.2mn proceeds March 2017 Acquisition of the business branch of Studio4Web dedicated to low-cost web hosting in the Croatian market 9

10 STRUCTURE AND ORGANIZATION 10

11 GROUP STRUCTURE BASED ON INDUSTRIAL CONGLOMERATE APPROACH Conglomerate business model. One holding company controlling six Opcos Holding company providing to all subsidiaries advisory in terms of both go to market strategy (expert support, resources and capabilities enhancement) and planning & control (Business unit control, managerial processes, financial KPIs implementation) Main benefits of conglomerate approach : (i) Synergies in SG&A, through optimization of IT, Sales and physical infrastructure and as well as collective technology purchase, (ii) Synergies from cross-selling programs based on the same business model in order to boost ARPU, (iii) Synergies in knowledge creation and sharing among different brands 11

12 Tophost srl. Italian subsidiary providing, through the brand Tophost, entry level solutions to more than 45,000 customers. Net Sales almost flat in FY17 YoY, reaching 1.2mn, even if in 2H17 it registered +16% YoY in bookings, as a result of turnaround efforts finalized as of May Subsidiary description 12

13 DHH.si doo. It manages two brands, Domenca and Domovanje, and is leading provider in Slovenia (with a market share of 28%, ca. 24,000 customers and 45,000 registered domains). Net Sales increased by 6% in FY17 YoY Subsidiary description 13

14 DHH.HR doo. Along with its subsidiaries is the largest hosting provider in Croatia, with 25% of market share, providing a broad array of services, from low-cost hosting solutions to managed hosting services addressed to high end customers through four own brands (Plus hosting, Studio4web, Infonet and Hosting IT). Double-digit growth rates in Net Sales in FY17 (+19% YoY), and total number of customers more than doubled since the IPO, establishing at ca. 24, Subsidiary description 14

15 DHH.SRB doo. Through the brand Plus hosting, is already among top ten Serbian registrars for rs. cctld domains, serving ca. 2,700 customers. Net Sales has grown by 25% in FY17, even if numbers remain still small in absolute terms Subsidiary description 15

16 Subsidiary description DHH Switzerland SA. Owner of the brand Artera, it provides high-end services, mainly addressed to customers requiring high reliability and technologically advances web hosting services (web agencies, ecommerce). It has been recently acquired (May 2017), and after that it has generated ca. 0.28mn in Net Sales DHH Italia srl. Italian reseller of Swiss premium brand Artera, ca. 2,000 clients. Net Sales in FY17 at ca. 0.5mn 16

17 17

18 Subsidiary key indicators Legal Entity Geography Customers Employees Net Sales ( 000) Tophost Italy 45, , ,199.5 DHH.si Slovenia 23, , ,357.2 DHH.HR Croatia 13, , ,495.8 Infonet Croatia 5, Hosting IT Croatia DHH.SRB Serbia 2, DHH.ITA Italy 1,935 - n.a DHH.SWZ Switzerland n.a Tot. n.m. 93, , ,

19 Subsidiary contribution to consolidated figures Pro-Forma EBITDA contribution by legal entity ( 000) Tophost DHH.si DHH.HR DHH SRB Infonet Hosting IT DHH.ITA DHH.SWZ EBITDA 19

20 Subsidiary contribution to consolidated figures Customers breakdown by geography Revenues breakdown by geography Switzerland 0% Serbia 2% Slovenia 27% Italy 32% Slovenia 26% Italy 53 % Serbia 3% Switzerland 5% Croatia 17% Croatia 35% 20

21 GROWTH STRATEGY 21

22 INVESTMENT STRATEGY Exploiting positive net cash position in order to finalize further investment deals following three main guidelines: Consolidation, New markets, Start-ups Criteria 1.Consolidation 2.New Markets 3.Start-ups Objective Increasing market share in the current company's reference market, acquiring small to midsized companies Entering in new geographies, or expanding product lines acquiring companies with a turnover around 1-2mn Investing at least 0.2mn in innovative start-ups with appealing ideas Sector Web Hosting (current business perimeter) Web hosting, Cloud computing and SaaS Cloud Computing, SaaS Stage of development Companies with an existing customer base and distribution network Cash generating companies, turnaround candidates Seed Stage Acquisition strategy Asset acquisition without retaining the management Acquiring the entire company and retaining the founder(s) through an equity stake in the original company or combined entity Initial minority stakes with contingent call options 22

23 Building a diversified product portfolio by integrating new verticals beyond traditional Web hosting field, such as Cloud computing and other Value-Added Solutions (VAS) Expanding supply chain, trying to meet all customers needs, mixing high quality products with satisfying experience levels Improving customers acquisition rates, renewal rates and, as a consequence, Life- Time Value (LTV) 23

24 Establishing an innovative inter-disciplinary team with proven track record in digital business and capital markets, providing specific functions to engage all subsidiaries needs in terms of: Expert support, cost and revenue synergies achievement, resources and capabilities enhancement Business unit control, managerial processes and financial KPIs implementation Turnaround capabilities of acquired assets from a financial and technological point of view, delivering strategic thinking, technology solutions, marketing know-how and other best practices 24

25 Implementing managerial capabilities in revamping and optimize acquired assets from a financial and technological point of view, delivering strategic thinking, technology solutions, marketing know-how and other best practices 25

26 Tophost case study: Adapting a range of operational & strategic measures to transform the organization At the beginning of 2016, when DHH took over active management of Tophost, all relevant KPIs were negative, since customer base was recording negative growth rates and average customer acquisition costs (CAC) were disproportionate if compared to lifetime value (LTV) provided on average by customers In addition, Tophost products were not listed on the first page when an internet research was run, and a survey conducted by the company revealed that clients thought of Tophost as a cheap and unreliable company To overcome these issues, many adjustments have been implemented, aiming at enhancing Customer acquisition / retention and Profitability margins As a consequence, bookings improved dramatically (+16% in 2H17 YoY) as a result of turnaround efforts which have been finalized as of May Additionally, there has been a marked improvement in the average lifetime value 26

27 FINANCIALS 27

28 Double digit growth rates in FY17 Customer base up by 19% YoY ARPU improvements across all legal entities Net Sales increased by 49% YoY, as a result of both accelerating organic growth and consolidation of acquired company, EBITDA up +49% YoY, reaching 0.53mn ( 0.89 on a Pro-Forma basis) Well balanced capital structure with positive Net Cash Position at ca. 2.5mn. Cash conversion ratio (i.e. OpFCF b.t. as % of EBITDA) close to 100% 28

29 Ramp up continues in 2018E-19E (Source for estimates: Value Track equity research reports) Revenues expected up +20% and +11% YoY respectively Operating profitability to progressively increase, with EBITDA margin expected at 12.5% and 12.6% respectively in 2018E and 2019E, being the result of higher intra-group costs synergies Cash conversion rate expected to remain in the 80%-90% region 29

30 DHH: Summary of financials (*) Pro-forma results (not audited) do not consider AIM Italia listing costs / other nonrecurring M&A related items and take into account financial effects of the acquisitions for the whole fiscal period (and not since the official consolidation date) Source for future financial results estimates: Value Track equity research reports Income Statement ( '000) 2016A 2017A 2018E 2019E Net Revenues 3,948 5,289 6,346 7,029 Other Revenues Value of Production 3,964 5,676 6,696 7,379 COGS -2,679-3,413-4,106-4,590 Labour cost ,732-1,800-1,901 EBITDA D&A EBIT Net Profit Adjusted Net Profit Pro-Forma results ( '000) (*) 2016A 2017A Net Revenues P-F 4,227 5,670 EBITDA P-F EBIT P-F Net Profit P-F Balance Sheet ( '000) 2016A 2017A 2018E 2019E Net Fixed assets 4,814 6,243 6,370 6,530 Net Working Capital ,369-1,634-1,853 Severance pay and other funds Total Capital Employed 3,868 4,852 4,705 4,637 o/w Group Net Equity 7,052 7,333 7,754 8,265 Net Fin. Position 3,185 2,481 3,048 3,628 30

31 Key figures & Ratios 2016A 2017A 2018E 2019E EBITDA Margin (% of Net Revenues) 9% 10% 12% 13% EBIT Margin (% of Net Revenues) 6% 7% 9% 9% Net Margin 4% 5% 7% 7% ROE 2% 3% 6% 6% ROCE b.t. 6% 7% 12% 14% Company data Outstanding Shares (mn) 1.42 Market Price ( ) 7.05 Fair Price ( ) Market Cap ( mn) Net Debt / Equity nm nm nm nm Net Debt / EBITDA (x) nm nm nm nm OpFCF b.t. as % of EBITDA 87% 118% 90% 81% P/E (x) P/BV (x) EV/Sales (x) EV/EBITDA (x) Revenue YoY growth nm 34% 20% 11% EBITDA YoY growth nm 49% 49% 12% Net Profit YoY growth nm 58% 79% 17%

32 Cash Flow Statement ( '000) 2016A 2017A 2018E 2019E EBITDA Op. WC requirements Capex (not incl. Fin. Inv.) Change in provisions OpFCF b.t As a % of EBITDA 87% 118% 90% 81% Cash Taxes OpFCF a.t As a % of EBITDA 69% 107% 75% 65% Capital Injections 6, Other (incl. Fin. Inv.) -2,783-1, CF available to serve debt/equ. 3, Net Financial Charges Dividend paid Change in Net Fin Position 3,

33 Operating Cash Flow and Net Cash Evolution 5,000 4, ,241 ( 000) 3,000 3, ,481 2,000 1,000 0 NFP FY16A EBITDA FY17A Op. WC CAPEX FY17A requirements FY17A Opt.FCF b.t. FY17A Fin. Invest. FY17A Cash Taxes FY17A Interest Expenses FY17A NFPFY17A 33

34 PEOPLE & CAP-TABLE 34

35 Founders and top managers deeply committed to DHH. Together they control ca. 55% of the share capital Uroš Čimzar co-founder, CEO Matija Jekovec co-founder, COO Giandomenico Sica co-founder, President Bootstrapped Domovanje Acquired Domenca In charge of growth strategies of portfolio companies in DHH Bootstrapped Domovanje Acquired Domenca In charge of DHH group finance and operations Former partner of Digital Magics (IPO 2013) Director of MailUp (IPO 2014) In charge of DHH group growth strategy and M&A Antonio Baldassarra co-founder, Board Member Bootstrapped Seeweb Invested in Docebo (exit 2015) Advises DHH on the group business strategy Guido Busato co-founder, Board Member Bootstrapped EcoWay Investor in DHH Advises DHH on the group business strategy 35

36 Giandomenico Sica 14.1 % Tomaž Koštial 0.5 % Free float 29.6% Seeweb 25.4 % Martin Romih 7.6 % Matija Jekovec 7.6 % Uroš Čimzar 7.6 % Matjaž Jazbec 7.6 % 36

37 STOCK & VALUATION 37

38 STOCK PERFORMANCE AND VALUATION RELATIVE TO COMPARABLES 01 DHH share price, 4 April 2017 to 3 April Based on 2018E-19E estimates provided by Value Track, DHH trades at a wide discount vs. selected international peers, ranging from 27% to 78% depending on the multiple taken into consideration 03 Based on the dataset created by Prof. Aswath Damodaran (Stern School of Business, New York University), DHH is trading at a 48% discount vs. its European peers in the sector Software (System & Application). The dataset includes 222 European public tech companies in the sector Software (System & Application), many of them listed on secondary markets like AIM Italia, AIM UK, Euronext Growth, Nasdaq First North, NewConnect Poland, MaB Madrid 38

39 11, , Share price ( ) 9,00 8, Volumes (#shs traded) 7, ,00 0 DHH volumes (rhs) DHH share price (lhs) 39

40 Company EV / Sales (x) EV / OpFCF b.t. (x) 2018E 2019E 2018E 2019E Wix.com Godaddy Endurance iomart Web.com Shopify nm nm Median Average DHH DHH vs. Median -74% -75% -53% -27% DHH vs. Avg. -78% -77% -58% -48%

41 STOCK DETAILS Listing Milan, Italian AIM Outstanding number of shares 1.42 mn ISIN ordinary shares IT Market Cap Approx. 10 mn 41

42 OTHER INFORMATION 42

43 FINANCIAL CALENDAR 01 Wednesday, 28 March 2018 Board approving the draft financial statement Monday, 30 April 2018 Shareholders Meeting approving the financial statements Wednesday, 26 September Board approving the sixmonth financial statements 2018 Friday, 14 December 2018 Board approving the 2019 budget 43

44 CONTACTS Address DHH S.p.A via Caldera, Milan, Italy Phone

45 Thank you. For further information, please visit