Esprinet S.p.A.

Good morning, everyone, and thank you for joining us for the EspritNet Group Q3 2025 result presentation. I'm Giulia Perfetti, investor relations and sustainability manager of EspritNet, and here with me, as always, is Alessandro Cattani, CEO of the group, who today, together with Giovanni Testa, our chief operating officer that I have the pleasure of introducing to you, will comment on the results. Today's call is being recorded and the podcast will be posted on the ESPERET website in the investor section together with the presentation. Your lines have been placed on mute, but after the speaker's remarks there will be a Q&A session. Please note again that this presentation contains forward-looking statements, so I would like to draw your attention to the regulation note on page 2 regarding the information contained within this document. I will now pass the call over to Alessandro to begin presenting and commenting with you on their Q3 2025 results. Alessandro, over to you.

Thank you. Thank you, Giulia, and welcome, everybody. As Giulia said, today, Giovanni Testa, our chief operating officer, who's been with the company for the last 23, 24 years, is joining me to comment on more technical aspects related to the P&L and balance sheet. So I will start with the highlights of our first nine months and Q3 more specifically. We have delivered another quarter of solid growth. We have sort of hit on all cylinders in terms of profitability and financial metrics. We have grown our revenues, we have improved our market share, improved our gross margins. We managed our cost structure. We grew EBITDA, reduced the financial charges, and grew EBIT and pre-tax. And we have reduced our net debt by close to 60 million against the September of 2024. So we're pleased of what's happening. Just digging into the results, the sector has again recorded excellent performance, especially in the Iberian Peninsula, where the sector is benefiting, among other things, of a really favorable economic situation. Whilst in Italy, we have seen a basic flat situation since the beginning of the year. Italy has been particularly well-performing last year, and this year is having a more flattish performance. As I said, our gross sales grew by 7%, and we had really excellent performance on our solution and services segment, as well as on the Zellia Tech division. So the green technology and energy efficiency segment, which we established last year. And since Q4, we will also benefit in this area from the recent acquisition of Varmat, a company that we expect to expand. helped the group to grow furthermore in this really interesting new segment, which is adding close to 16 billion of addressable market for the group. Gross profit was up 5%. Giovanni will comment more on it. And the gross profit margin was up as well. EBITDA adjusted, which is equal to EBITDA is up 3% in quarter. sorry, 3% in the past nine years, nine months of the year and 4% in the quarter. We had very strict control of our cost structure after Q1 where we had a spike in costs. We have been able to effectively manage our cost structure in the following two quarters and we plan to do so moving forward. Cash cycle is standing at 28 days, one day less sequentially, and we have improved our net financial position against September last year of close to 60 million euros. So, based on this, we reiterate our position regarding our focus for the full year. We have a range of a bid objective for the end of the year between 63 and 71 million euros, and we expect to be on the upper portion of this range. So, now, digging more specifically on sales, As I mentioned before, Italy was, since the beginning of the year, flat as a market, and we grew 1% in terms of gross sales in Italy. The market was down 2% in Q3, and we were flat in Q3. We matched the growth of the market in Q3 and we are behind the growth of the market, which is quite remarkable, by the way, mostly because of decisions taken in the, especially in the area of smartphones and some other consumer electronic products where we walked away in order to improve our net financial position, our working capital. Portugal. It's growing as a market, but we are way ahead outgrowing the market after two years ago we took bold decisions in terms of restructuring of our go-to market, getting rid of the vast majority of cash-divorcing businesses, and hence we're now seeing a strong rebound, mostly in the SME market, and to a lesser extent in the retail segment. If we look, Morocco is growing again. We don't have figures around the Morocco market. It's a small business for us, but extremely profitable and very interesting. If we look at the product categories, what I would draw your attention to is the growth in the market of the screen segment. This is a blend of PCs and smartphones. The smartphone market is not performing so brilliantly, but the PC market is growing high double digit, and we are growing in line and above the market, especially in PCs. We have sort of made our choices on specific areas of the smartphone business in order to improve our working capital. devices is an area overall that is, as a market, since the beginning of the year, is underperforming. We have witnessed a special pressure on TVs and video gaming, and we have suffered a little bit more than the market. But again, here, more so, we are making our choices, taking our decisions in terms of what is happening and what will happen with our product portfolio because of return on capital and implied optimizations decisions, especially in terms of working capital. Solution and services. Well, in solutions, we are way outgrowing the market, which has been rather flattish in Q3, but is expected to be still vibrant in this quarter. The green tech is down compared to last year, mostly because, well, effectively only because of a major shortage of products we had. In October, we booked high double-digit growth in this segment, recovering at that were due to happen in September and which were not possible because of lack of products. So we're again positive here. I remember everybody that we had an acquisition which will be hitting our numbers effective October 1st. So we'll see them in this current quarter, no effect whatsoever. in Q3 and, well, in the first nine months, varying the fact that during Q1, mostly, we bear the cost of our due diligence on VAMAT. And that was part of the spike of cost that we had during Q1. We fully expanded the cost and we didn't put anything in our balance sheet. Last but not least, if we look at the performance by customer type, we grew in line with the market with retailers and retailers during the course of Q3. During the first nine months, we underperformed again because of choices made, especially on product segment. And on the other side, we outperformed the market in the IT reseller segment. Again, a clear message of focus on higher margin businesses, especially in solution and services. So now, if we look at the P&L of the three dimensions, so the three businesses we run, Esprunet as a whole with PC, smartphones, and printers and consumer electronics, Vivali, which is focused on solutions and services, so value-add IT distribution, and Greentech solutions that run under the brand Azalea Tech and also in the next months. we see that we had, in terms of revenues in the quarter, an aspirant that grew, especially because of very good performance in screens, namely on PCs. We were in line with the previous year in Vivaldi, and we were down on Zeliatek. In terms of a beat-up, and EBITDA margin, you see that we had a little bit less of EBITDA margin in the quarter on V-Valley, mostly driven by lower absorption of fixed costs, whilst we had higher performance in Esprit, exactly for the same reason. Like-for-like performance in terms of gross profit was mostly positive on all product lines where we outgrew the market. And even in those areas where we had a little bit of sales decline, gross profit margins were up. But Giovanni will comment overall in a second. And on green tech, even though we had a decline in revenues, but the profitability was up. So all in all, we're fine on the performance. And if we go to the following slide, we can dig into the P&L and balance sheet, and I leave the stage to Giovanni. Please, go ahead.

Thank you, Alex. Good morning to everybody. The P&L summary, we can start from sales. Alex already gave you a lot of details of what we did in Q3 and in the first nine months. I would like to underline that the group that we can see in sales in Q3 and also in the nine months are related for the most part for Q3 for the performance of the devices and the screens, the overall screens and notebook that we managed through the Apple Sprint brand. and for both the nine-month and Q3 for the high performance of services and solutions. And we are very happy of what we are doing in this segment because it's a clear demonstration of what our strategy declared some months ago is bringing some very good results and a good performance. The gross profit percentage, is higher both for Q3, respect to the previous year, and also for the nine month. And we can see that also the growth or the gross profit at absolute value is more than the growth of the sales. So it's another demonstration that we can't go through some vendors in which we can have a very good performance connecting what we can call vendor contribution to a vendor financing that we will see later in the balance sheet summary. About different sales SG&A and we can divide this type of cost figures of the loss balance sheet into parts. The variable costs are higher than the, both in the Q3 and also in the nine-month, are higher than of the previous year for some few basis points. On the contrary, the total SG&A are growing in Q3 less of the nine-month accumulated. This is because, if you remember well, and also Alex said a few minutes ago, we had the spike in Q1 related to the cost of M&A deal of OAMAT that we closed. We have the closing in October the 1st and the signing in September 15th. And also for other two aspects, that we have to underline. The first one is that we anticipated some advertising costs related overall for their own brands in Q1. And the other aspect was the increase of the collective bargains that we had in March. And the second tranche we will have in November. So we'll see in the next quarter. About the fixed cost, for sure, we see that the percentage of incidents on sales, even the quarter to quarter, And also in this quarter is less of the cumulative one. And we hope to have the same performance also in Q4, seeing that the very strict control of the fiscal cost is bringing some results. For the other fixed costs that we can mention now, we had some technology costs increased with respect to the previous year, connected to AI and cybersecurity projects, and some a cost related to ESG new regulation of this year that obliged us to stay in line with the new rules. At the end of the day, the EBITDA margin is still flat for the Q3 with respect to the previous year. and is in line for the near-to-date September. The percentage, sorry, the growth of absolute value in Q4 was higher than the percentage of growth in nine months. Between EBITDA and EBIT, passing to the EBIT figure, more or less are the mainly due to the deposition of the right of use of the warehouse of Tortona, the new logistic hub of the group that we opened, if you remember, in August 2024. And in fact, the impact, passing to the next line of the profit and loss, we can see that the impact of EFRS 16 that is growing in a month, 3.5 million euro against 2.7 million euro. In Q3, the fact that we opened in August, and so we have the impact also in the previous year on the three months of the quarter is flat. About other financial expenses, We are flat in the community in that month, but we can see a very important decrease of 29% of the financial cost in Q3, mainly due to a lower average debt that we had in Q3, for a small part also for the interest tax that is lower than respect to the previous year. All these figures bring to the PBT that is growing, from our point of view, a lot in the accumulated nine months of 16%, but also the performance of Q3 of 5% of growth is, at our eyes, very important. About the net income, we see a decrease of the net income that is fully connected to a different income taxes that is applied in Q3, but we think that the estimated tax burden that we have applied will bring at the end of the year to have the same tax rate of last year. If we pass to the balance sheet summary, we'd like to focalize your attention on two aspects. The first of all, that also Alex mentioned before, is the decrease of net financial debts of around 16 million euro. that are the result of a better way to manage our working capital. Our working capital is strictly connected to a commercial working capital because for us, everything is connected to inventory, trade receivable and trade payable. If we see the figures and the progression of the figures, since from the September 2024 to September 2025, we can see that compared overall the two quarters, we can see that we decrease, we were able to decrease of more than 20 million euro the inventory. We were able to decrease the trade receivable of other 20 million euro roughly. And we are with a very small reduction of trade payables that are connected fully to a product mix different from the quarter of 2024, the third quarter of 2024. We are fully focalized to the reduction of the working capital And overall, to have from our vendors, as I said before, not only a vendor contribution that is reflected in the increase of the gross profit, but also a better vendor financing that, in our view, is to manage better, to reduce the inventory days, and at the same time, to have a TNC for the time of payment of vendors, the DPO, better and larger than the past. So what we are doing is trying to move to vendors that structurally require AI of the working capital and moving to a better working capital vendors just to have, at the end of the day, better working capital and also a net financial debt in decreasing respect of what we did in the past. This is reflected also in the ROSE. We have in these next few slides some graphics that reflected the performance that we have in the quarters. Overall, I would like to show you the next one. That is the working capital matrix of quarter-end. that can show you in a graphic way two different aspects. The first is that the test cycle of the last four years, the Q3 of the last four years, is decreasing every 44 days, 36, 35, 32. And also for this year, with the different seasonality respect to the previous year, 2024, we can see a continuing decrease of the cash cycle. In our matrix, our target is 19, 20 days, because we have calculated, we think to be cash neutral at 20 days. So our target for the future is to arrive to 2020. Alex?

up to the other part. Thank you, Giovanni. Well, the Rossi return on capital and cloud evolution is splattish as a result of the numbers we have just seen. Okay, thank you, Giovanni. And let's wrap up with our final remarks. Well, first of all, we... we have designed a strategy and we are implementing it. And the strategy is to grow on the back of the digital revolution on one side and the green revolution on the other side. And hence, a strong focus on Vivaldi and Zeletek. And on the other side, we have, through Esprunet, the opportunity of grabbing the, let's say, the refresh cycle of PCs on one side, and as Giovanni mentioned before, and we've mentioned many times, the opportunity of redesigning slowly but constantly our product-customer mix in a way that we will be focused more on lower working capital absorbing combinations of product customers. The in brackets target of 20 days is something that we have mentioned many, many times. It's an aspiration and not necessarily a target for this year. It's the aspiration of being a cash neutral, which we could achieve having roughly 19 to 20 days of the cash cycle. We're definitely pushing in that direction. The results of these first nine months are in line with the strategy for another year again, because this path of rebalancing has been going on for quite some time now. And we believe it's a clear indication on our capability of creating sustainable value in a market that keeps on changing. So, again, we will expect us to keep on focusing on solution and services because there's this digital transformation that is affecting the enterprises, large and small, and so there's a lot of and a lot of opportunities for our resellers, our customers to go after these opportunities. And we're trying to leverage our leadership in Southern Europe in this sense. We have opened up the XelioTech division and we're in this case surfing the green transition wave and the acquisition of FAMAT is opening up new opportunities for us. As I mentioned, there are robust opportunities within the PC refresh cycle and analysts estimated that this will continue for several quarters. We have a really strong momentum of the Spanish ICT market. We're leaders there. Roughly 36% of our business comes out of Spain, and as long as Spain is one of the key economies in the world, especially in Europe, it's by far the best one in terms of GDP performance, we have a unique opportunity of grabbing value out of that. If we look at our cost structure, again, we, as Giovanni said, we're really focused in maintaining our focus on cost structure optimization. It's been in our DNA for the last 20 plus years. We had challenging Q1, but then in Q2 and Q3, I think we showed that we were able to rebalance and again in Q1, in reality, most of the where one-off costs that were brought into that quarter rather than being either spread across the year or being put as one-off. I refer specifically to the VAMAT due diligence consultancy cost. So working capital is our key focus. We want to go on in the optimization capital portfolio of vendors working capital related portfolio vendors so. Also in light of the sustained gross profit margins, the performance expected by the markets, what we have seen in October in terms of our sales and our gross profit margins, in light of all of the above, we keep on having a very good feeling on the last quarter, which is an extremely important quarter for us because of the seasonality. Spain, as a market, is really hitting on all cylinders. Italy is a bit more challenged, but all in all, we confirm our guidance of 63 to 71 million euros of a bid adjusted, and we believe we should hit the upper end of the range. Well, with this, I want to thank everybody for listening to us, and I give back the stage to Giulia for the Q&A session. Thanks.

Thank you, Alessandro, and thank you, Giovanni. Yes, we can start with the Q&A session. Let me remind that to ask questions, you should kindly book your speech, and then unmute your microphone.

so the first question comes from mr storer so mr story please go ahead hello can you hear me yes very well okay perfect two questions please the first one is on on italy and if you can elaborate a little bit on countries weakness in particular if the performance that we've been seeing is something that back at the beginning of the year you were expecting or if the country is moving let's say somewhat slower compared to your initial expectations and what should we expect going forward. The second one is on working capital. Is it fair to say that given the strong focus on capital reduction and also the fact that interest rates are coming down, I mean, you could decide to push more on factoring going forward, maybe giving up some margin gain in order to end up with a better debt position? Thank you. Yeah.

Well, thank you. Well, on Italy, the analysts forecast a recovery of Italy in terms of growth rate year on year, especially for the next year. low single digit. Those are the last figures that came out of a context a few days ago, yesterday, probably. They expect the slight growth for this quarter as well. We are factoring into our numbers a little bit more of cautiousness, so we think more of a flattish market in our forecast. Let's hope to be surprised by better than expected performance, so more in line with what the analysts expect. At the beginning of the year, there were expectations for a slightly better market. The reality is that the consumer segment has been weaker than expected. The corporate spending and SME has been reasonably in line. There's been quite a period of time during this year in which government sales were particularly weak due to certain issues that the market well knows that happened end of last year. But things are apparently recovering, so things are moving back to normality. As for working capital, yes, we are – especially in the S-Prinet segment, so the PC, smartphones, and consumer electronics and printers segment, where we sell to retailers, where we do indeed have a higher chance of using factoring. As we have a higher source of income now coming from Zeliatek and Vivalli, we can be more aggressive and selective in the deals that we take. And this is driving a number of vendors, either to improve our vendor financing, as Giovanni mentioned, so the difference between levels of inventory and payment terms, or they are giving us extra contribution so that we can, for example, use higher levels of factoring without affecting our gross profit margins and indeed, as you have seen, improving them. So, yes, we keep on balancing the two things. Interest rates going down, of course, help. But Giovanni mentioned a sharp decrease during the course of Q3 of our interest charges that went down 29%. That is vastly, not entirely, but vastly the result of a lower average debt which is reflected only partially in the end quarter figures that we delivered. So in this sense, we are positive on what is happening and the opportunities that this combination of higher contribution from the higher margin businesses on one side and lower interest rates on the other side can give us in terms of leverage in readjusting the working capital profile of especially the Esplanade companies, Esplanade Italy, Iberica and Portugal.

Another question from Mr. Berti, so I'll give you the floor, please.

Hi, good morning. Thank you for the presentation. First question, I was wondering if the suspension of the Transizione 5.0 plan could create in any way some headwinds for Zegliatec market environment in the coming quarter, or if there is no correlation? Second one on the integration of VAMAT and specifically the opportunity you see in Benelux and Ireland. I mean, what commercial synergies do you expect? And lastly, if you can provide some color on the recent announcement you made related to the launch of SalesMate and AI Smart Search, what kind of benefits do you expect? Thanks.

Okay, thank you. On Transizione 5.0, Giovanni, any impact forecasted? No.

We have no impact forecasted in this moment. We will see in the next month, but there is no impact for the business of Zetatech.

The integration of Varmath, we are working in this very moment on the budget. The first indications of the stand-alone Varmath business are Benelux plus Highland are very positive in terms of additional revenues, mostly because we sort of freed up the management team from a very long period of time of negotiations, which definitely distracted them. And on the other side, the key vendors that are working with VAMAP I'm particularly pleased of having VAMAT under the umbrella of a bigger, uh bigger player that can help not only in terms of financial stability but also in terms of potential investments in people and services on the other side we are really really looking after the possibility of bringing the unique expertise of the varmint people especially the expertise they have in high-end certifications that they have on specific vendors into our Zeliatek business. The Green business is pretty peculiar and system integrators that are installing these solutions need to have specific certifications to design the project and size it correctly. If they don't have it, they rely on the distributor that needs to have onboard engineers that are able to do this kind of activity. We don't have enough of them in Italy. VAMAT is an expert and they have specific certifications. If we will be able to bring this knowledge into Italy, that's a significant margin opportunities for us because we will increase our level of services. On the last question, we have announced a couple of tools that are the first two that are of significant visibility in our AI transition project. The focus is mostly on effectiveness of our sales process more than on cost reduction. One tool is designed to improve the performance the capabilities of our website to offer the right products to our customers, effectively turning into a sort of consultant. And on the other side, we have a tool that will significantly improve the effectiveness of our sales teams that will be able to update our CRM and initiate a number of activities by themselves, by forms of a memo that the system will provide them, but especially by our marketing people that will have a list of to-do actions, very specific ones, in order to improve significantly the chance of closing potential deals. There's a bunch of other stuff that is coming. Giovanni mentioned we are spending money in IT because we are working on a bunch of product programs and initiatives to bring automation into our systems. Again, we We began with activities mostly aimed at improving the effectiveness of our sales teams. There will be also cost-reducing activities in time, but in this moment, we're mostly focused on helping our people to sell better and more.

Thank you. Mr. Nargi, a question. Oh, sorry.

Do you have another question, Mr. Berti?

No, no, I was thanking Mr. Kattari.

Thank you. Thank you. Another question from Mr. Nargi. I give you the floor, please.

Hello, good morning. Thanks for taking my question. Just a quick question on the revenue mix. So we have seen in the quarter a very good performance from the green segment linked to the PC refresh cycle. While on the, let's say, less positive side, we have seen the V-Valley and in particular the solution and services that were slightly software, at least compared to the good progression we have seen in the first few quarters. Could you comment a bit more on the dynamics you are seeing on these business segments? And if might we expect, let's say, a reversal over the last quarter of the year with solution and services to regain momentum by the end of the year? Thank you.

Well, thank you. I think the answer is a technical point. If you look at the slide five of our presentation, we grew solution and services by 8% at gross sales level. The point is that in the following slide, slide number six, we reported the net sales. And in solutions, especially, we have a disproportionate amount of sales that are affected by IFRS 15. 100% about a significant chunk of our software sales, which are growing very fast, cloud sales as well, and to a lesser extent, cybersecurity sales are affected by this. So if we look at the performance in the market, the market figures are calculated on gross figures. All the distributors provide gross figures, and then they calculate They report gross and net figures according to their own calculations of IFRS 15. We do the same, but we outgrew the market by product category, solution and services. So I think it's mostly a technical aspect. All this said, We do believe that there's an opportunity for us to keep on growing in this segment. We are doing very well. We have seen October sales again are extremely positive in the solution segment, the solution services segment. So that's what's happening. And the market has been softer because there has been, especially in software, across Europe some softness and This market is also affected by the seasonality of large enterprises purchases as well as government purchases. So it might be also that there are swings in the market because of this. But I can tell you that it's mostly technical. The numbers are those on page five. And we are really positive on what we're seeing. Giovanni, I don't know, on October.

I fully agree with you. And also in Q4, we will see a growth for this segment.

Great. Thank you. Okay. I think there are no more questions. So we can end the call.

Okay, good. Well, thanks, everybody, for joining us today in this call. The group keeps on going. executing on the plan. And let's see again for the presentation of the numbers in February, I think.

Yes.

Okay. And thank you, Giovanni, for joining us since today. Thank you.

Thanks all for participating and see you next time.