Span Publishes Q1 2023 Results

During Q1 2023, Span recorded an increase in sales revenue of 4.4% YoY, slight EBITDA growth of 0.9%, and a decrease in net profit of 17.4%.

The total consolidated revenue of Span increased by 4.5% (or EUR 1.1m) YoY in the first quarter and amounted to EUR EUR 25.8m. Out of total revenues, the segment of IT services with high added value increased by EUR 0.7m, whereas revenues in the segment of software asset management and licensing recorded a growth of EUR 0.4m. The growth in revenues is driven by three out of four main Span segments: Software asset management and licensing, Service Center management & Technical support and Software Solutions Development. The all mentioned segments contributed to top-line growth. However, growth was slightly offset by lower revenues from Infrastructure Services, Cloud & Cyber Security segment. However, we note that the Span subsidiary in Ukraine, TOV, noted a further decrease in the top line, further slightly offsetting mentioned growth. Regarding the Ukraine market, Span was mainly impacted on top line as Microsoft has enabled end users in Ukraine to use its products and services without compensation, which will result in the evaporation of revenues for Span from the Ukraine market in 2023. However, we emphasize that this situation remains unchanged from 2022, as this impact was already present during the previous year.

Breaking the revenue down into segments, the largest absolute increase was recorded by Service Center Management and Technical Support, which increased by EUR 1.2m, or 33% YoY in Q1. Following them, we have Software and Business Solution Development, which increased by EUR 0.9m, or 56% and Software and Infrastructure Services, which increased by EUR 0.4m, or 2% YoY. Cloud & Cyber Security was the only segment that noted a decrease in revenues by EUR 1.3m (-26%).

Meanwhile, OPEX grew by EUR 1.2m (or 5.8% YoY) and amounted to EUR 23.5m. OPEX growth was mainly driven by a growth in Staff costs, which grew 35% (EUR 1.9m), which was offset by a decrease in mostly all other costs, overall resulting in a higher OPEX. However, we note that this growth in Staff costs (and OPEX consequently) should not come as a surprise as Span employed 200 new employees during 2022. Consequently, this growth in Staff costs was as expected. Further, we emphasize that the growth in staff expenses follows an increase in revenues in the segment of IT services with high-added value. Higher growth in staff expenses is somewhat of CAPEX for an IT company like Span, which is something that should be considered when looking at staff expenses – it should not be “just” be considered as a pressure on margin, rather than an investment. Also, most of the newly employed were hired in the mentioned high-added value segments. Besides mentioned Staff costs growth, Material costs noted a 6.2% decrease or EUR 1m. Those are the main lines affecting total OPEX growth of 5.8%.

EBITDA increased slightly by 0.9%, compared to Q1 2022, mainly as a result of higher revenue from IT services with high added value, which is something that the Company wants to focus on. Further, below the operating level, no major changes occurred compared on a yearly basis. Overall, the Group noted a decrease in EBT by 8.3% YoY, amounting to EUR 2.1 (vs. EUR 2.3 in Q1 2022). Finally, Span reported a higher tax expense as the previous year was impacted under tax levies (ZOPI). However, we note that Span still has tax levies until FY 2025, but the tax expense for reporting purposes does differ from the real effective one.

Span key financials (Q1 2022 vs. Q1 2023, EUR m)

Source: Span, InterCapital Research

Domagoj Grčević
Category : Blog

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