Global Dominion Access, S.A. (DOM) Earnings Call Transcript

[Foreign Language] [Interpreted] Welcome to Dominion's results presentation. [Operator Instructions] Before starting, I would like to remind you that before we finish the presentation, we'll move on to the Q&A. [Operator Instructions] So let's start with the disclosure of the presentation.

Good morning, and thank you very much for attending this financial presentation of the third quarter of 2026. Yesterday, our Board of Directors didn't only approve the results that show the evolution of these first 9 months of the year, but also gave the approval to a number of changes in the Board of Directors. So now Mikel Barandiaran is the Executive Chairman and is going to be replaced by German Pradera as from January 1, 2027. I would like to talk about the results. And later on, I would like to make a few comments on this process and so that we could then move on to your questions on both issues. As regards to the first 9 months of the year for Dominion, I would like to deliver a global interpretation of what we consider to be most relevant. One of the most important things of the quarter as well as of the rest of the year is that 90% of the business, which covers the activities of GDE and GDT services, which, as you know, are recurrent have grown organically compared to the previous period of the year before by 5.2%. In other words, 90% of the business has grown over 5%. But as mentioned in previous quarters, the situation of global uncertainty has slowed down the execution process in the segment of GDT projects and in 9 months of the fiscal year stands below the figures reported last year, although the portfolio is diversified without cancellation. We can't forget about the tensions in the Gulf, which is another element that has been taking place throughout 2026 which affects our activities located in the area and its related industries. Finally, we have to remember, we're not talking about performance here. We are in a fiscal year where all of the segments to a greater or lesser extent have divestments that have to be taken into account when you compare the data, either divestments carried out during 2025 or this year. This is the end result of the continuous advancement in the simplification of the country covered by our strategic plan. Along these lines in this quarter, we have sold our stakes that Dominion had in call center services for operators under the Ampliffica companies. This is a non-core activities with very little impact, but it is important from a personal level because we are about 400 people from our periphery. These divestments mean that we have sales figure and EBITDA figures that are lower than the figures reported in the previous year. We're sacrificing the short-term so that we can lay the foundations of the company that we want to become in the long-term. Another thing that I would like to point out as regards what's happened in this quarter of the year is that we've been authorized to initiate the commercial operation, COD of the wind farm, Cerritos as from today. In other words, as from today, Cerritos will close its testing stage and will initiate its operational stage at full capacity, receiving full remuneration for its production. But now let's take a look at the details of this summary. As I said, to analyze the figures and the segments, we have to bear in mind the strategic investments and divestments carried out, which I would like to review. As regards to divestments, we have mainly the sale in December of 2025 of the industrial activity in France and the TTB virtual mobile operator portfolio that has been progressively transferred since the first quarter of 2025 and the MasOrange shops in January 2026. We also have as activities available for sales, the biomass in Argentina as the sale process started in Q2. In this quarter, we will be eliminating non-core activities. Then we have our acquisition processes. We have, for instance, the ZCR business in Germany. In June, a Spanish circular economy, company in Spain has diversified our capabilities in terms of waste recovery, industrial waste recovery. The turnover in 9 months, the effect has been minus EUR 55.6 million and the effect in terms of EBITDA has been minus EUR 7.6 million. But in order to correctly interpret our financial statement, we have re-expressed the account at 9 months in 2025 to include the same perimeter as the figures that we are presenting today. With this, we have closed the first 9 months of the year with a business figure that accounts for a positive organic growth of plus 2% at constant currency in these 9 months of 2025. Once we discounted the inorganic effect, which means is minus 7% and the negative effect of ForEx that has practically no impact, which is minus 0.2%. We maintained positive organic growth, therefore, in the context that is complex, as I said at the beginning. As regard to profitability, EBITDA in Q3 stands at EUR 94.6 million, with margins that continue at high levels, 12.5% over sales. Although there's a lower contribution of the GDT projects in the mix, because the segment with the largest margins, recurring businesses like GDE and GDT services are showing a solid behavior and they're stabilizing the generation of results. The central structure stands at 2.8% over sales, which represent a slight variation in comparison with other quarters and amortizations have dropped a bit also momentarily compared to previous period. But -- then we have the minority shares, taxes and interrupted activities maintain very similar levels. What we have to talk about is the evolution of financial results that have improved globally by 27% compared to the same period of the previous year. But even so, in order to be able to compare things correctly, we have to bear in mind several factors in terms of the figure reported of the previous year as well as in the case of the figure reported for these 9 first months of the year. We have to take into account the divestments and transfers to discontinued activities that have been carried out. Secondly, we have to take into account the extraordinary effects in both fiscal years, starting off with the year 2025 when we had an impairment of the photovoltaic assets in the Dominican Republic after the sale took place in July 2025. In Q3 of 2026, we've included several extraordinary impacts. For instance, the divestment in the stakes in Ampliffica, which has brought about a correction of minus EUR 2.5 million that is covered by the results that affect our financial outcomes. There are also other extraordinary balance sheet costs that affect the net results in an amount of minus EUR 3.7 million, which also are related to the simplification process. Let's say that we have an increase in the total attributable net result that goes from EUR 6 million to EUR 8.2 million in the figure. If you take a look at the previous figure, the figure now is 35% higher. But let's see how each one of the businesses has contributed towards this evolution, starting off with GDE, that is our environmental business. This segment closed in the first 9 months with a business figure of EUR 330 million, which represents an organic growth of plus 4.8%. In this segment, what had a very important impact is the rate of exchange in minus 3.5%, which explains the increase of 1% observed globally. As regards to profitability, the business has reached a contribution margin of EUR 40 million. This means that the margin over sales has increased 12.1%. At an aggregate level, GDE accounts for 43% of the sales and 35% of the company's contribution margin. But what is really important here is that we've maintained recurrence and growth in both activities and in all geographies with the exception of the Gulf because of the situation that I mentioned at the beginning. In the area of circular economy, this quarter, we've signed new recovery contracts for waste in Spain and Latin America and with the first step in Uruguay. And in decarbonization, we have emission control contracts in Asia and multiple thermal efficiency services there, and we're opening up a new geography with a contract in Panama. GDT Services, and this is the segment that is focused on electricity grids and telecommunication grids. It closes this Q3 with a business figure of EUR 361.5 million, meaning that the organic growth has been plus 5.5%, and this is the segment that has grown most. This segment, contrary to GDE has recorded a positive impact of the exchange rate. You can see the different geographic distribution of both businesses in this period. GDE has a negative impact on the exchange rate with currencies like the American dollar, the Indian rupee or the real and GDT service is exposed to Latin American currencies and has a positive effect. The contribution margin reached 17.4% in the first 9 months of 2026, which also covers the high operational profitability that we can achieve in this business. This segment has concentrated most of the divestments and therefore, has the biggest impact because of the sale of former nonstrategic B2C businesses. This GDT services represents a major opportunity because we have lots of capabilities and because of the investments that are going to be made in Spain and other geographies in terms of the electrical grids and electrification. Our position is excellent, and we are signing new contracts like the one that has been signed this quarter for medium voltage lines for industrial clients in Spain. Then our experience is fundamental to manage in Latin America, our adaptation to the new owners of the grids. We're mainly talking about telecommunication networks after the sale that Telefonica did in the recent months. Now these are in hands of Millicom, the operators of Ecuador, Colombia and Chile. And in Tech, it's in Intega. Finally, the GDT projects, this closes 9 months of activity with less activities than last year, and this has to do because of the global uncertainty. Also the classification in the previous quarter of biomass as something that has to be sold also has an impact on the figures. This means that at 9 months, we have EUR 26 million less and EUR 8 million less in turnover and in the contribution margin, respectively. We consider it very relevant that we have maintained the solidity of our portfolio with a backlog figure of EUR 364 million, once again without any cancellations of projects until now. We've also signed -- we've signed and begun the execution of a contract for the technological integration of the telecommunication structure at the Bilbao Exhibition Center. I said at the beginning, it's been a positive evolution with organic -- very strong organic growth of the recurring part of the business in GDE and GDT services that shows the recurrence and the diversification that has been addressed by the company during the strategic plan. Secondly, the first 9 months of the year that are affected by a low level of execution in the GDT projects and because of the situation in the Gulf that is affecting GDE. Now as regards to the succession process, we want to point out that this succession is to be an internal operation of a person that has been working for Dominion for 14 years at the highest possible level and who's been -- who worked in different countries and different corporate and business areas. German Pradera joined the company in 2012. After spending several years in Peru, he participated in our listing on the stock exchange, and he's directed the areas of business, service business and GDE. So therefore, he has in-depth knowledge of the company and he knows our culture, and he knows the operational areas that are going to have a bigger weight in our future. But apart from that, as regards to timing, we taken into account the natural passage of time of our current CEO will turn 65, although he doesn't look 65 or he will turn 65 next year. This coincides with the new strategic plan. It makes sense that who's going to be carrying out as the CEO should lead it from the very beginning. In this context, we're carrying out this change. We're making this change. This will enter into effect as from January 1 next year. The public presentation of our plan 2027, '29 will be carried out in the first part of the year once we close the year 2026. But apart from that, well, the fact that Mikel is now going to become the Executive Chairman, means that we are going to fully support in the transition of the new CEO. And Mikel Barandiaran will carry on defining the strategy and lead anything related to corporate relations. Thank you very much for your attention. Now we're going to move on to your questions. Thank you.

[Operator Instructions] Carlos Trevino from Banco Santander, first. [Operator Instructions].

[Interpreted] Firstly, well, all the very best for Mikel and for his colleague, German. And I have 3 questions. So, could you please give us a reference on where do you think the EBITDA could finish in the year? And you said of the EUR 150 million, you could expect EUR 125 million came from recurrent businesses and EUR 25 million from projects, we've accumulated EUR 13 million in 9 months. So what do you think -- how do you think that you'll be ending the year in terms of EBITDA? And the second question has to do with projects. So could you say something about what do you think about how the business is going to evolve in Q4, but especially in 2027, bearing in mind that the backlog has been dropping for 5 quarters in a row. And if we look at the new entry of orders in the backlog, the accumulated figure would only be EUR 18 million. And the third question has to do with the B2C business. In the presentation, you say that you're reaching the end of the optimization process for the B2C business. So could you please explain what this phase actually means? And could you give me the perimeter too, the perimeter you're contemplating for the future as regards to maintaining the B2C business?

[Interpreted] Carlos, this is Roberto. So it's Patricia and myself that are going to be answering. But giving you a figure, we're working with the forecast now and giving you an EBITDA closure figure for the year. Well, I think that this is not the right time. obviously, we have somewhat less execution in projects, as you pointed out, and this can be felt in the closure. But we know what seasonality does. We also know there are lots of companies and corporations that close their budgets at the end of the year, so do governments. I think that Q4 could be active as regards decisions and as regards being able to have a better visibility of the portfolio and its execution. I think that we've had low levels of execution for the couple of years. Together with the plan, I think that in 2027, what we should do is reactivate operations and projects and so on and so forth. But obviously, I mean, giving you a figure now and therefore, EBITDA for the year is too premature. We'll have more visibility in the future, and we'll see what it is we can say about that. Then as regards B2C, Well, what remains is very little. It's not very relevant really. We think that we only have what has to do with Phone House. What we can say is that in this strategic plan, you know that this is not going to be an absolutely core activity of the company, although it is true that in parallel, we do believe that we have focused on generating value. In other words, Phone House is generating value or worth. But the thing is that strategically, it's not something in which we think that the future is very clear in terms of grids and the environmental area, et cetera. Having said that, we will be open to operations or we will be also open to new formulas that can contribute more value in Phone House. Who knows if in the strategic plan because we -- well, it's irrelevant really to carry out a corporate process, but we'll see what happens. Everything is currently being studied, and we'll see where we -- what we do. It will be an absolutely minor issue and that we will hardly be talking about in the future. Thank you very much.

[Interpreted] What about 2027? Any comments on how you see the project? Well, considering that the arrival of new orders has been pretty poor in the accumulated figures for the first 9 months of the year.

[Interpreted] Well, we're positive for 2027 because we believe that Q4 is going to give us more visibility in operations in Chile, in the Dominican Republic. There are many other projects that are still have to be carried out and also new operations. We believe that the commercial side of things, that good news is going to be coming along. I think that we should do better.

[Interpreted] Well, yes, there's lots of commercial activity. What you said about the portfolio is also something important for us, and we cannot continue adding on things to the portfolio now that we are at these levels. But as Roberto pointed out, as regards to 2027, we think that there are significant opportunities that could be materialized through the data center world, which has less weight in our previous portfolios, but which we are now working on intensely. I think that this is where part of that recovery could come from in 2027 or at least that's what we hope and expect or expect and hope. Thank you very much, Carlos.

Okay. We're going to give the floor to Luis Padron. [Operator Instructions]