Tinexta S.p.A.

Good afternoon. This is a course called Conference Operator. Welcome and thank you for joining the Tenexa Group Consolidated Results at the 30th of June, 2023 conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Joseph Mastragostino, Chief Investor Relations Officer. Please go ahead, sir.

Thank you, operator. Good afternoon and good morning to the folks in the U.S. Thank you for joining Tenex's first half 2023 results presentation. Here with me today, Odone Pozzi, Group Chief Financial Officer. Good afternoon, everybody. As a reminder, all the relevant documentation of the first half 2023 results can be downloaded from our company website in the investor relations section. For the purpose of this call, I will go over the first half 2023 highlights and updates, but instead we'll go over the first half 2023 financial results as well as the business unit's performance, providing us with a deep dive. The last part of the call will be dedicated to Q&A. A recording of this conference call will also be available on our company website and it will be posted upon completion of this call. At this point, I will kick it off by turning to page four of the presentation. As you have all received the information, revenues in the first half 2023 came in at 182.5M, growing 9% versus prior year. EBITDA adjusted came in close to 38M, growing 2%, but more importantly, EBITDA on a reported basis grew 6%, reaching almost 35M euros. Net profit came in at 45.4 million, growing over 200%, mostly on the proceeds of Revalota, as you all know, which we communicated to the market in the month of March of 23. Net financial position came in at 52.6 million, improving around 32% versus prior year. The prior year figure is here on the bottom right, 77.6 million in the fiscal year 2022. Turning to page 5, some of the numbers here have been commented. I will draw your attention mostly to adjusted free cash flow, which definitely O'Donoghue will deep dive and provide us with more detail. But adjusted free cash flow of continuing operations came in at 29.3 million, growing 27.4% versus prior year. On an LTM base, adjusted free cash flow continuing operation was 55.7 million, which was another historical high. In the first half of 2023, digital trusts continued to register solid growth, posting a plus 12.4% growth in revenue. EBITDA on an adjusted basis was 15.5% in terms of growth. The EBITDA margin was superb, hitting 28.2%. Cybersecurity grew 15.8% in revenues. but obviously did much better in EBITDA on an adjusted basis. It continued to register a strong rebound, growing more than 59% versus the prior year. The EBITDA margin was 11.3%. Business Innovation posted a 1% growth in revenue in terms of EBITDA. The EBITDA registered in the first half of 2023 was $16 million. EBITDA margin was 29%. We'll discuss about the, I would say, the evolution of EBITDA in just a second. In terms of the most recent events and updates, as you know, we finalized the acquisition of the 65% ownership of Acercia Limited. So we have now welcomed Acercia into the group. We also signed a 50-50 joint venture agreement with Digital Magics for investments in innovative startups. and we also completed the acquisition of the 40% remaining stake of Certudolf, reaching now 100% ownership of the share of capital. Turning to page 6, as a reminder, we have commented most of these numbers. It must be said, though, that the comparative data of the first half of 2022 have been restated in relation to the completion in the fourth quarter of 22 of the identification of the fair values of the assets and liabilities of CERTIROP, EVALUE Innovation, as well as FERABIT as of the consolidation of the first of May of 22. Now, I would like to draw your attention maybe to one of the most important slides that we have on the deck, which is slide seven. On slide seven, we think this is an important slide, and we would like to highlight the cadence and therefore the back-ended weight of our EBITDA. As you can see, the relative weight of 2023 on a quarterly adjusted EBITDA basis is perfectly in line with that of the last two years. which clearly show how the first two quarters evolved versus the third and even more so the fourth quarter. The assumption relating to the average weights of 2023 considers the midpoints of the guidance on a 2023 EBITDA adjusted basis. As you can see, the first quarter's weight was 14% and the second quarter's weight EBITDA was 22%, exactly in line with 2022 and 2021. Let me turn it now to Adon. I don't know if you have any other comments on this slide, Adon?

No, definitely what Joseph said is very important. We feel comfortable with our guidance that basically was confirmed. What's happening in the first half is aligned basically with our projections. And definitely as we expect to grow specifically in the most important way in the cyber security is going to have most of the profitability by the end of the second part of the year, the same exactly what happened last year in business innovation. So definitely we are going to face a very important Q3 and Q4, but we feel comfortable with the achievement of the geysers. Okay, so after Joseph highlights, we go to page nine. We have our income statement for the first half. The revenue went up Like we said, close to 9%. We are very glad about the results of all the business units. Definitely the growth of digital trust as well as cybersecurity were very strong. And overall, if we look at our top, let's say, 15 products, they increased their weight on the total revenue. This means that our strongest products are performing well. And honestly, when you have a strong product, you should be in a position to deliver strong margins. You know, looking only at the first half is not, like we said, very so relevant as we are looking for the full year. In terms of costs, we see that the cost of service basically remains the same in terms of as a percentage of revenue at 36%, while we have a slight increase in the cost of personnel as an incidence. But, you know, this We see this as a timing as we prepared our infrastructure to address the futures revenue in the second part of the year. The part of our recurring cost is slightly below the previous year as we incur in lower M&A activity, but this is not a projection for the full year. In terms of depreciation amortization, definitely we have more amortization on intangible assets. we are investing quite significantly in terms of product development, in terms of system improvements, and therefore, you know, we are incurring a couple of million more in amortization. We have to consider that almost 50% of this amortization are related to the PPA. It means that part of the goodwill that we allocated after the acquisitions on specific assets. So this is something that is a non-cash item, definitely, and this is going to reduce basically the level of risk for future impairment. We are very happy about the handling of the financial charges. You know, despite an increase of the interest rates, we are reducing our financial charges. This has been driven by two main items. The first item is the fact that we improve our net financial position compared to previous year, but I would say Even more important for us is the fact that we basically almost fully covered our exposure in terms of rates and therefore basically as of now we have a cost of debt in the range of slightly above 2% while we are able to invest all the cash that we have available at 3% rate. So it means that honestly we are getting a benefit from this. And we believe that by the end of the year, we could be in a position to almost bring this figure to zero. If we go down to the P&L, we have the income taxes that are higher the previous year, but last year we benefited from the francamento that we have done on one of our largest companies. and the tax relief that we registered help us to have a better tax impact. But as of today, we have no at all significant permanent difference on this. During the first half, we also registered the profit from the sale of Revaluta, and so the net profit is up to 45.4 million for the first half. In terms of balance sheet, the net investment capital dropped last year from Q2 to Q4. Now this year it's going up again, but this is only driven by the new investment that we have done, especially with defense tech, as is mentioned here at page 10. and the investment in the acquisition of digital software license. Very positive, and I will deep dive later on, is the working capital management that decreased from the beginning of the year of 11 million that helped to deliver a very solid ordinary cash flow. Net financial position dropped by 25 million. There are several matters that has driven to this. Definitely the freak issue has been very solid with a significant growth compared to previous year. Then we had the capital increase of Bregale, as well as the disposal of Revaluta. On the other side, we had the dividends that accounted for 33 million dividends distributed, acquisition for 26 million, mainly driven by DefenseTech. And this is what has driven, basically, the net financial position. Shareholder equity basically went up because of the profit of the period and the breakout capital. If we move to page 11, as you can see, I already commented a bit the net financial position. I will focus now on the free cash flow. First of all, all the business units improved their free cash flow. compared to previous year, and this is a very good index indicator for us. Second, we put an extremely strong focus on cash collection. You know, this is over the last 12 months, you know, the interest rates increase has driven, you know, our clients to be, you know, a little bit later in paying us, but we reacted very strong, and we were able during the first half to significantly improve this. CAPEX has been slightly above previous year as part of our continuing investment in order to improve our products for our customer as well as solution for internal management. to page 12 basically is the same. I will jump to page 13 to show you the net financial position LTM bridge. So basically, the adjusted cricash row from continued operation over the last 12 months has been close to 56 so this is a very good indicator for us it means that we have a very solid cash flow generation that is supporting our results my financial charges are definitely a very thin very thin line we were able to distribute the dividends quite significant significant dividends of course the drop of our Net financial position has been driven by the sale of Inolva and Revaluta. We continue to purchase treasury shares to serve the stock option program for the management. And I would say these are the most important items to which we have to add the Bregal second branch of the share capital increase that was completed during Q1. Last year in July, we had the completion of in TESA San Paolo share capital increase. So basically, On an LTM basis, the ratio between net financial position and the PZDA is just around 0.5 times. So this is in front of a very strong, you know, Capability to deliver activities in cash is very strong. Our net financial position is very low. And so our strategy to continue to invest and to continue to pursue M&A development is in a very, very solid and clear position. Now we'll try to dive into the three business units. We have already commented the total group performance, and we have seen basically out of the three divisions, we have two of them that have performed really well. Digital Trust, if you go back, over the last three, four, five presentations is delivering a very steady and solid growth. With every quarter, the revenue growing more than 10%, and the ABTDA growing even more than the revenue. And cybersecurity delivered also a very encouraging and strong first alpha. And then we will deep dive to better analyze the situation of the business model. So let's go into page 16, into digital trust details. Like I said, Revenue went up 12.4%. InfoCert, obviously, is driven this growth, growing more than 50%. But, for example, also Visura has been able to deliver a revenue growth in the range of 20%. So most of the legal entity of this segment went up in a very strong and solid way. Same help code also into the ABTDA with, again, the ABTDA margin going up now from 27.4 up to 28.2, and this is a very, very encouraging performance. Let's say that overall, if we look at InfoServe, the off-the-shelf performance went up by, let's say, 14%, and the DTM went up by 17%. So this means that our strategy is very solid. Our sales force and our capability to deliver are recognized by the customer. And I would say even more, we have a very strong capability to convert ABTDA into cash. And in fact, this business area, as also a negative working capital, it means that we are running very fast in terms of collection. This first half has been, like I said, very solid, and we have a lot of confidence in delivering the second half results and the full year results. Cybersecurity. So after six months, now we are in a full position to confirm that what we said one year ago is definitely happening. Like we said last year, during Q1 and Q2, we invested massively in hiring new people specifically focused on cybersecurity. And, you know, I remember most of you were putting a lot of question of this, but we had clear our strategy and we implemented it. You know, the manager of the cybersecurity was able to handle the, you know, the incorporation of these new people and these new activities, and we started to build up backlog for this. You know, in so starting for from Q1 23 and conferred in Q2 23, you know, our revenues are going up at 16%. That is, you know, a performance well above the market of the cyber security as we were very confident to do. We are pleased to say that all the three companies of the business unit has recorded a very strong ABTDA growth. All three of them were going up, and as a combined segment, we went up close to 60%. that we are talking still about small numbers, but as small numbers were last year, but the numbers are becoming bigger and bigger, and the EBITDA margin went up from 8% to 11%, and the best is next to come in the second part of the year. The group has also signed an agreement with Google Cloud that put us also in a position to develop further opportunity together. The second part of the year will be, you know, critical for us, definitely the delivery of Defensio that was launched on the market that represents a part of our revenue and profitability of the second half. The portfolio is encouraging. We were growing among the different business units of the cybersecurity. We are growing significantly in the segment cybersecurity compared to other, you know, information technology activities. So, this is the situation. Obviously, H2 will be the most important alpha of the year, but we enter into the second part of the year with a much better position compared to previous year with a much higher battle and already with customers that has a lot of confidence. If you look at the business innovation, we have a slightly different situation. We know that warrant is the most important part of this business and if we look at the revenue the revenue are up uh one percent first of all the the markets the the markets where a warrant and other legal entities are operating are very different from Here we are talking about consulting business and we are not talking about pure tech and digital business. Although we are definitely investing and being more exposure also in consulting for digital innovation. So the revenue went up 1%, like I said, compared to our expectation for the first part of the year. Definitely what we are slightly missing here is revenue that could have been, could have come from, you know, a potential register of players into this market that has been delayed in terms of, you know, low. Nevertheless, you know, the company is performing well. The part of the digital business is going up from 3 to 7 million euro revenue, helping us. We had a lack in terms of revenue on the business of subsidized finance, that is the business with the highest profitability, and therefore the revenue mix has influenced quite significantly the margin of the first half. also the contracts for internationalization services, as we expected already, were down. We do expect in the second half of the year, you know, the capability to recover this delay compared to the previous year and to help overall the group to deliver results within the guidance of uh that we share with the market in the first at the beginning of the year and we are going to we we come to the the border director that as uh uniquely today as confirmed by this year and now, you know, I completed my part. I leave to Joseph for closing remarks, and then, obviously, we will be fully available for any questions.

All right. So, thank you, Donna. At this point, I'm going to turn to page 20. Page 20 is exactly what you all are accustomed to. We would like to stress the fact that On a 23 base, the organic growth is intact to where, as we're saying, trying to target revenues in the numbers that you see here, digital trust plus 10% in revenue, organic cybersecurity in the 30-ish percent, mostly in the second H, as Odona just said, and business innovation in terms of revenues expected to grow 15%. The EBITDA trajectory is on the right side. That means that digital trust is expected to grow 11% versus the prior year cybersecurity anywhere in the 40-ish percent growth and then a 5% for business innovation. 2022 and 2025 CAGRs are the same. Let me just comment briefly on page 21 where we have confirmed the guidance. And let me walk you through it. Revenues are expected, again, on a 23 versus prior year basis to grow 11 to 15%. EBITDA adjusted is expected to be anywhere between 8 and 12%, and NFP already digested is expected in the range of 0.2 and 0.3 times. On this, we need to say that on a like-for-like basis, the guidance is confirmed as of December 31st, 2022, and this follows the disbursements of the period for the acquisitions that took obviously place, and as well as the lower collections and the postponement by management of the exercise of matured stock options. That is an adjourned number. A lot of the analysts have already accounted for that. Some have, some have not, but this is absolutely in line with what has been communicated to the market.

What I would add, Joseph, is that here, you know, the cash flow from the operation is projected exactly as we expected. So the difference is only in in disbursement for defense tech and less cash in from the matured stock option. So what is important is that the operating cash flow is expected to be exactly as the original guidance.

Right. So and we'd like to stress that obviously in function of also the last 12 months, free cash flow adjusted is exactly growing even more than what we did actually last year. So 30% of net profit in terms of dividend with an inflation assumption around 6%. I would stop here. I would like at this point for the operator to give us some of the Q&A, see if there's any questions. and I'll leave the floor to the next question.

Okay, excuse me. This is the course called Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question comes from Isako Brambilla of Mediobanca.

Hi, good afternoon everybody. Three questions from my side. First one is on cyber security. You mentioned several new initiatives including partnership with Google Cloud, absence from the advisory market, launch of the defense CEO. Could you give us more color on potential impacts of such initiatives, in particular if you have any sort of backlog or contracted orders for the FNCO? Second question is on business innovation. Your guidance implies an important acceleration in the second semester. reassuring to see the growth targets for the division fully concerted, but implied performance for the second half looks a bit impressive. So could you better explain the drivers to support such a sharp acceleration, if you may, between Warrant Hub, Comarch, and other digital marketing activities? Last question is more on strategy, because for generations we've been used to be Can you hear us? Is that cool?

Yeah?

Yes. All right, perfect. So I'll take the first and then I'll go on the other two. In terms of cybersecurity, I would like to start from a couple of facts, right? We already said this during the call last year. We invested heavily exactly a year ago on people, human capital. As you know, that was clear. That was also a function of the performance of last year. These results and those investments are already showing their strength. 59% growth in terms of prior year EBITDA is definitely a good achievement. The growth, as we said, is growing steadily around all of the businesses. We would like to emphasize that, and that means both in the advisory part as well as digital transformation. You definitely asked about Google Cloud. The Google Cloud agreement is an important agreement because it is basically concentrating mostly on, first of all, partnership of, I would say, accountability, right? I mean, Google Cloud does not need any presentation. It has chosen Tenexa in order for that to execute the deployment of services, mostly around threat intelligence. We highlighted that. In the press release, we're going to actually underline it here. So it's all about utilizing also the potentials that INEXA has, in particular in the threat intelligence part. We remember it is a partnership, uh, the, the business development is underway, so we can't really discuss any further, uh, expectations for the year, but we can definitely say that we're in a much better position, uh, than not having the partnership per se. So this is a partnership a of strategy. It is a partnership B of having also the potential to sell our solutions in the Google cloud marketplace, which is definitely. an important element and gives you some value added on that. So on the partnership, we'll see how it evolves. Give us, you know, next couple of quarters to kind of give you a bit more of a qualitative slash quantitative answer. In terms of Defensio, Defensio is definitely, I would say, an important step in the development and deployment of a product. This is a proprietary product. It is called Defensio because it is jointly developed with Yoroi. And the idea here is, first of all, let's talk about timing. We deployed it at the end of May, at the end of June. So we're talking about very brand new product, still need to gather a bit more data. The feedback is definitely positive because what it does, just to give you a bit more of a background, it allows small organizations, both public or private, to have medium-sized, that is, to have a threat intelligence services. This is a plug-and-play service. In other words, entirely private. deployed remotely, so you don't physically need people to go into these small organizations. Most of these organizations can also be small city halls. So we're talking about the cosiddetti comuni here in Italy, which have, first of all, a budget constraint and have little to no protection from a cybersecurity standpoint. So with this type of product, which is a much more evolved sandbox, we would like to say that we're able to get into those systems, check the systems remotely, and give them a first stop, first shop approach in cybersecurity. So the unit price, we're not going to disclose, but it's obviously a very advantageous one, which gives our commercial colleagues and therefore to Salesforce the opportunity to pitch the services and to these organizations at the same point, try to get these contracts signed. We will see how the product evolves in the second part of the year. We'll keep you posted on that, but I think this is definitely very good news because of the development of the product, which I would like to underline is proprietary.

Yes, we were talking about the BI. Definitely, you know, like I said before, you know, Q1 has been for the reason I explained below the previous year. We are confident and, you know, our view and the detailed management analysis that has been performed are telling us that, you know, in the second part of the year, we should recover, you know, and we will recover this, and we do expect by the end of the year to land, you know, in line with the previous year or slightly above. Overall, the guidance is confirmed. Honestly, if we look at the results of first start, probably we will be in a position as of today to deliver slightly above in digital trust and potentially above previous year, but slightly below our initial expectation in BI. Having said that, you know, we are not worried about the performance of the second half. You know, Joseph started in showing you a chart where organically our last quarter is very strong, is typical of the cycle of the business innovation. We have to remember that most of the revenues of warrants are coming from when the investments of our client has been completed and put up and running. And our clients, you know, definitely they aim to complete their investment that they put them up and running. before the year end in order to benefit in the tax declaration of the same year that is going to occur in April, May, to apply for this potential tax relief and benefit. So this is the reason why the revenue is concentrated over there. It is going to be a tough second half, but we have to say that a tough second half we already experienced last year and we deliver as expected. To confirm that is part of the business, if... you know our strong revenue of Q4 has been collected in first half 2023. It means that you know that strong revenue has been collected in the following quarter. So we are not worried about this. Obviously we are very concentrated and because you know we have a few small room for for for changes but we know what to do and the management is fully fully focused on that the last point in term of mna well we completed the acquisition of the the first part of defense during this year. And as you know, we have a call for the majority of defense tech next year. We are working with them and we are focused working with them in order to define a combined plan that is going to support the exercise of the call. So far we are very happy and we are working very closely. As far as concerns of Cerzia acquisition, we completed the acquisition the first 65%. We are glad about the start of the business between the signing and the closing. And so now we are working at the integration of Acercia into the group. The performance are aligned with the expectation from the acquisition. Obviously, Tinexta also, if you look at the net financial position, is closely looking at potential deals. in Italy, but also outside Italy. Priority for this year continue to be digital trust and business innovation. Like we said in the past, we do believe that potential opportunity in France for business innovation will be very important, as well as we are looking at potential opportunity around Europe for digital trust. For sure, we will focus only on relevant targets, targets with very solid position with significant expectation for growth.

Okay, great. Thanks, Bob.

The next question is from Carlo Maritano of Intermonte.

Good afternoon everyone. I just have a couple of questions. The first one is on Acercia that you mentioned before. I was wondering if you could provide us some data, given that the latest data we have are updated to the end of March 2022, so at least how much this company grew last year. And the second question is related to the cash flow of the quarter. I've seen that You have a positive contribution from the option. I was wondering if you could provide some follow-up on what companies are impacted by these adjustments.

Thank you. Carlo, can you repeat the second? Was it on cash flow?

The second one on cash flow is related to the adjustment of adoption that contributed positively to the quarter. I was wondering what is the reason which are recorded subsidiaries involved in these adjustments?

I go for the second question in order to have well understood what you say. You're talking about the impact of cash flow on the stock option, you mean?

No, the put option. Okay. To get the.

into the presentation if we move to page uh yes uh to page uh page 12 or page 13. your media on the ltm basis of the start First half?

The 5.6 million euros of the first half.

Yes, yes, yes. This is, you know, basically, what has changed here are two things. You know, the final exercise of the put option for CERTE Europe has been lower than what has been projected earlier. at the end of the year. So basically, we negotiated part of this after having reviewed the performance, and therefore we got, let's say, like a discount. Second, we applied a new weighted average cost of capital that reduced a little bit also the proportion. So this is what basically happened. A small amount that help us to reduce the net financial position. So, this is basically what happened. I don't know if you make this clear to you. Okay. Okay. You know, for. Let's say as of now, we are not releasing specific figures. We are going to consolidate the company since July 1st. and you know with when we are going to report uh uh in uh in september results uh together with the the other uh the the the nine months results uh we will we will provide more insight and more more details on this

Maybe just to give a bit of a quality answer on this, Carlo, just to try to guide you a bit more on the press release, we definitely had given some pro forma figures, right? So, and we saw that the growth was double digits, and we can definitely confirm that that's the trend, right? So we're not seeing any potential downsides on this, but the double trend is.

From the information we have, we are very glad of what's happening, but, you know, I honestly, I don't want to comment on results that would be not consolidated in our books. You know, Carlo, I will be more than happy to share with you and with all you guys all details, but since we are going to consolidate the company.

Okay, thank you.

We kindly ask participants to please pick up the receiver when asking questions. The next question comes from Russell Pointon of Edison.

Good afternoon, Irene and Joseph, and thanks for the presentation. I've got a couple of questions, please. First one, in the digital trust, there was a nice pickup in growth from Q1 to Q2, and in the presentation you refer to, you know, incremental revenues coming through from the partnership with QRIF. So could you just give a bit of background on that and perhaps scale it? My second question is on business innovation. You know, we fully understand the seasonality of the business, but could you give some idea of sort of there are lots of positives and negatives within there. So could you give some indication of that? How big are the positives and how negative are the negatives? And in terms of that progression to meeting the full year guidance, are there any businesses where you have more limited visibility? I would imagine advertising, for example, has very limited visibility and obviously some businesses probably a bit more cyclical than others.

Thank you very much.

I start with the first question about digital trust. The impact of the CRIF business is very, very limited. It took less than half a million, but with very high marginality. And this is going around our expectation. You know that we are consolidating this since basically one quarter, one quarter, so this is not a big deal. What is very important is the capability of the digital trust business to be very steady and addressing a very steady growth. and having an operating leverage that is becoming quarter after quarter more important. So we were able to lift up the profitability from, let's say, 27% to 28%, and this is definitely very, very important. So on this area, definitely we feel very, very strong and very happy in how we are handling this performance. If we move to the second question on the business innovation and decisionality, I hope to, and maybe I ask help of Joseph here, I have to explain why the business is delivering in the second half, where You know, the investment has been completed and putting up and running. When the investment are up and running, then they can, get the relief when they are reporting the tax declaration for that year. So there is a rush of every client to try to complete this by the end of the year. If not, the cash relief from the tax authority will come 16, 18 months later. So this is the primary driver of this. If we look at the report and the results by business unit, like I said, in the business innovation business, we had a slight delay that partially was expected. in financial subsidized finance, basically, because we have a couple of million, if not two and a half million less in terms of revenue that is driving a very high loss of marginality here. Then we have, Warrant was able to develop other business lines I mentioned that, for example, for the digital innovation, we went up from 3 to 7 million, but the profitability we have on the other business lines that is still very strong, above 25%, is not the profitability of the Finanza Regulata Automatica that is on the range of 50%. So this is the revenue mix, as we wrote in the presentation, is the main driver. So then we have the capability to develop other businesses. Our support to our clients in energy is improving quite significantly, as well as in the education business, as well as in European funding. Some of them are going up. some of them are going up. But this is part of the business because every year the budget law is addressing a different distribution of funds. And so if you have several business lines, you are able to compensate and get some more opportunities. If you are focused only on a few business lines, you have the risk not to balance exactly the revenue. like we said to Isacco and Carlo, you know, the second half is going to be very busy, but we have done this last year. So, you know, the management is focused, they are running for Achieve This, the portfolio backlog is supporting us, and this is what we do expect. Like I said last year, you know, we should Definitely, our business is not a consumer business. It's a client-driven business. So if you have one big deal in one quarter instead of the following quarter, this can change the picture of the quarter. The important thing that we are having across the full year are all the businesses that we put in our guidance in our business. So, you know, we knew since the early beginning that our second half, also in our internal budget, our second half was expecting a stronger growth compared to the first half.

So just going back on to... Things like the advertising, I would imagine the visibility on that is relatively limited. Is that safe to say?

No. Advertising is not an important part of our business. Digital trust is zero. Cyber security is zero. Warrant tab is zero. The only part is the digital marketing for Querio. There we are facing, you know, some issues compared to our projection. Still the results are growing compared to previous year in terms of revenue and in terms of profitability we are almost there.

But again, we are talking about, you know, less than 1% of our revenue at that time.

Okay, yeah. Sorry for the use of the word advertising. I meant the digital marketing.

No, no, no. But, you know, Aquario is providing performance-driven capabilities to our clients. So since last year, we handled for them, the acquisition of advertising in order to deliver the performance. But for us, it's basically a pass-through, you know?

Yeah. Okay. Thank you very much. You're welcome, Russell.

The next question is from Alexandra Orsova of Equita.

Hi, good afternoon. Thank you for taking my questions. So three questions on my end. The first one is more technical, just to get better. The net financial position, we're starting a debt on EBITDA target for 2022. The second one is again on business innovation. I recently read on the newspaper that the Court of Auditors in Italy is pushing the government to stop the automatic procedures for finance. and all the sub-finance projects, so meaning that first companies, SMEs, must be approved the investment and then be entitled to get the grant by the government or by the EU. So do you think that if this happens, if this is approved, can, let's say, hold or hurt in a way the business innovation revenue generation? And the very last one, maybe if you can give us some more color on the joint venture, the partnership with Digital Medics, you mentioned at the very beginning, what kind of partnership you expect to have and what kind of investments and the amount you expect to invest in these activities. Thank you.

um although here uh yes you are right like we put in the in the in the press release you know if not it's gonna be complicated you know everything has already was booked in first half has been, you know, projected to the end of the year. Asherzia came after and therefore is not part of this projection, but we have not either in the projection revenue and EBITDA. So this is the first answer. What's happening instead on CERT Europe, we already had the debt for the put. What is going to change is just a swap between less cash and less debt for put, but the net financial position is not changing. So Asherty is out in revenue, ABTDA and debt.

So for the second one, could you repeat, were you referring to the registro? Can you just explain it a bit better? What were you asking about the registro?

From my understanding, the Court of Auditors, Corte dei Conti, is asking the Italian government to change the rules, the Transition 4.0, the Transizione 4.0 grants are awarded to companies. So now, basically, the company can invest in a project and then, doing all the application, can get the amount of the credit, sorry, the credit incentives. but they can start the work whenever they want at the end. Now, from my understanding, the Court of Auditors is asking the government, in order to allow the companies to get these grants, first to ask for permission, let's say for an approval, that the project, the investment, can be supported by these grants. in order to start. Otherwise, if you start the investment and then ask for the grant, for the incentive, you cannot get it.

Let me stop you there, Alexandra. Let us do a bit more work, given that we want to do a follow-up, and then if there's any news, we'll let you know. The answer is we'll check with the business unit to see if there's anything to really mention. Of what we know, I mean, for the time being, everything is as is. I mean, we don't see any major disruptions, but we'll see, and I'll get back to you on that. The third question was on digital magics. I mean, here, you probably know digital magics is a listed entity. The strategy is very simple in the sense that digital magics does this. This is their typical job, which is investing into startups or even grownups doesn't really need to be a startup. We are basically putting together the strategy of us being a company that looks into digitalization. So the angle here is that of identifying either startups or grownups that have that digital transformation angle, digital trust angle, and see if that can be of interest also with Digital Magics. This means that on our side, we will invest up to 5 million. We said that already and announced that on the press release. It is for us an opportunity. It is for Digital Magics an opportunity. The workflow will be that of Digital Magics actually giving us A potential funnel of businesses that can be at this point evaluated jointly. That means both from our side and digital magic side and we will then have an investment committee that will look at the business plans. see how they are keen with the business of T-NEXA in particular on the digital angle, and then we'll decide if to invest or not. This is part of a strategy that T-NEXA put together of open innovation. which is basically given that we are a reference company specifically in italy and also at a european level in the digital uh transformation side it is good that we can invest in potential ideas that can become you know grown-ups or even larger companies that could eventually become larger and larger brilliant thank you uh are there any other questions operator

At this time, there are no questions registered, sir.

I would like to thank you all for connecting to Tenex's first half. Stay tuned for our next quarter results, which would be obviously in the month of November, and we would like to wish you all a happy summer.

Yes, absolutely. Thank you again, everybody, for attending today, and happy summer. Bye. Talk to you soon. Bye.