Tinexta S.p.A.

Good afternoon. This is the Coral School Conference Operator. Welcome and thank you for joining the TENEXA Group Consolidated Results at 30th of September 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 of Tinexta. Please, go ahead, sir.

Good afternoon and good morning to the folks in the U.S. Thank you for joining Tinexta's 2023 conference. 9 Months Results Presentation. Here with me today, O'Donohue Pozzi, Group Chief Financial Officer. As a reminder, all the relevant documentation of the first 9 Months 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 9 Months 2023 highlights and updates. O'Donohue instead will go over the first 9 Months 2023 financial results as well as business units' 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, given that you all have the presentation, I will kick it off by turning to page four of the presentation. Here we have highlighted some of the key data. Revenues for the first nine months came in at $269 million, 0.5 plus 9% versus prior year. EBITDA adjusted came in close to 57 million, growing 4% versus prior year. EBITDA on a reported basis came in at 51 million or growing 5% versus prior year. Net profit at a reported base was 48.5 million. Net financial position was 91.5 million versus 77.6 billion of the prior year. Starting to page five, aside from some of the numbers already commented, it is important to highlight that adjusted free cash flow of continuing operation rose by 11% versus prior year, hitting 40 euro millions. And even more significant is the adjusted free cash flow on an LPN base, which came in at over 53 million, showing the group's continued ability to generate significant amount of cash. Net financial position grew versus fiscal year 22 to 91.5 million. Such increase, it's important to highlight, is attributable to the acquisition of a minority stake in Defense Tech Holding, as well as Acercia, which took place in the months of April and July of 23, respectively. This was partially offset by the proceeds of the sale of Revalota, just as a reminder, which was completed on March the 7th of 23. Net financial position over the last 12 months EBITDA adjusted came in sub-1 or 0.94 times. In the first nine months of the year, in a nutshell, digital trust continued very strongly with growing trends. Revenues grew 14.4%, with EBITDA growing nearly 15%. EBITDA margins stood at a historical high, almost close to 29%. Cybersecurity grew 15% in terms of revenue, even more I would say outstanding was the performance of EBITDA on an adjusted basis, which grew 67% versus the prior year. This is, therefore, an extremely great result. We have posted resilient growth for four consecutive quarters, with EBITDA margin reaching nearly 13%. Business innovation grew fairly in terms of revenue, with EBITDA reaching $22 million, and EBITDA margin close to 28%. Going to page six, as most of the comments, the numbers have been commented, I would like to remind you that the comparative data for the first nine months of 22 have been restated in relation to the completion in the fourth quarter of 22 of the activities identified in terms of fair value for the assets and liabilities of CERF Europe, consolidated November 1st of 21, E-Value, fully consolidated in January 1st of 22, announces April 22, Serabit in May of 22, and Plant and 9-in-1, consolidated as July 1st, 22. It is important to highlight that the results in the first nine months of 23 include the contribution of Assepsia Limited. and its subsidiaries. We'll go into that detail and provide you all the backup of this. But it is important to highlight that the contribution is as of August the 1st. So it is basically August and September of the third quarter. Such contribution is shown as a change in scope while as a result of the aforementioned mergers, the contribution of the 23 results of the acquisitions finalized during 2022 is not punctually measurable and accountable as a change in scope. For any further details, always refer to the interim report. Turning to page 7, we think this is again another slide that we are proposing again in Q3. It is an important one because we would like to highlight the cadence and confirm that this is a back-ended EBITDA story with the fourth quarter obviously having the greatest weight in terms of adjusted EBITDA. Again, we have confirmed that the average weight per quarter is absolutely in line with the average of the prior two years. At this point, I will leave it to Odone to provide us with a deep dive on the results.

Thank you, Joseph. Good afternoon, everybody. Good morning to people who are connected from the U.S. As anticipated by Joseph, you know, results of year-to-date Q3 came, you know, aligned with our expectations first. Overall, we got... two business units, Digital Trust and Cyber Security, that has continued the excellent performance of the first two quarters. This was also confirmed in Q3, showing the steady growth of Digital Trust and the significant rebound of Cyber Security. As far as concerns business innovation, the situation is uh is on track with you know our expectation and we do expect a quite significant important q4 as occurred during q4 2022 and this is refers exactly to what to the last slide that jose presented to you uh if we move into into the the pnl uh the pnl is uh showing uh grow in the range of above 9% for the consolidated results of the group. In top five products and services, all our business units are represented. It means that revenue is well distributed between the companies. and between the different business units. In terms of cost, we do see that service and other costs are growing less than the revenue, and this is bringing some contribution of profitability, while the personal costs are growing more than the revenue. This is something that we do see as a temporary situation, as the Q4 is going to be the stronger quarter of the year where, you know, the absorption of personal costs will be much higher than in the previous courses. So we do expect at the end of the year, you know, an improving of profitability compared to the situation where we are. The EBITDA adjusted came in the growth of 4% compared to previous year. The LTI incentives as well as non-recurring costs are aligned with the previous year. EBITDA is at 19% compared to 19.8% of previous year for the reason I mentioned above. The level of depreciation and amortization that are linked to our investment policy in terms of capital is increasing. This is the result of the continuous investment from our business unit. Digital Trust, Cyber Security and Business Innovation are continuing to invest in new solutions and products in order to keep very updated and fresh our portfolio of products and services. And this is showing an increase compared to the previous year. If we move to financial charges and income, we do see here a quite significant improvement. So our capability to cover the financial debt, keeping it well below the current cost of money, allow us to invest the cash available at the higher interest rates than the cost of debt. That is bringing up, as we can see, we recorded just in nine months 5 million positive interest. While the negative interest grew compared to the previous year, half of this was related to a couple of write-offs in terms of minority interest in some activities. Income tax is aligned with our expectation, higher than the previous year, but here last year we had a tax relief related to the francavento we performed last year and it was already very clear explained last year. Results of this continued operation includes both in first nine months 22 as well as in first nine months 23. the gain related to the sale of Inolva in 22-4 with a net gain of 41 million, and the gain of the sale of Revaluta in 23 with a gain of 37 million after taxes.

Capital investment of the group grew from the year end, mainly is driven by

the acquisitions and the consolidation of Ascensia from August 1st, and this accounted for 44 million, as well as the acquisition of a minority interest in defense tech, for which we acquired 20% of the stake for a value of 25 million. For the rest, there are no other significant changes. CapEx came at 15 million euro on a recurring basis with 9 million euro of amortization. Net financial position as Joseph already mentioned is up but only driven by the acquisition we performed in the first nine months and free cash flow kept a very positive standard and as we can as we will see then you know with the significant growth compared to the to the previous shareholder equity increase for several reasons that we can see here at page 10, including the completion of the second tranche of the capital increase performed by Bregal in the quarter.

If we move to page 11, I would say very interesting is the growth of the free cash flow from continuing operations.

The adjusted free cash flow, excluding the non-recurring components, went up in the first nine months from 36.2 million up to 40.3 million. This means a quite strong capability to convert MTDA into cash, despite the increase of 4 million that we have in cap as compared to previous year. Basically, we were able to cash and to improve the working capital of 6 million compared to previous year, and this is for us the confirmation of the quality of the services we are rendering to our clients and our capability to cash it. I move down, I would say I will move to page 13, as already explained this. You know, over the last 12 months, if you look at the movement of the net financial position, the free cash flow from continued operation in the last 12 months is above Again, this is encouraging and confirms the capability of the group to generate cash from the operation. We were able to distribute dividends at 33 million. Then, the group went through several M&A operations, both as a sale as well as as a acquisition that has changed this situation. We went through also capital increase with Regal that I have just mentioned for 30 million as well as the capital increase of Intesa and Warrant after the completion of the transfer of full value from Innova that was sold to Warrant. Let's move now more into business deep dive. At page 15, you are here, you know, in just one page, the situation of the group with, you know, what I mentioned before, the very positive performance of digital cyber security while For business innovation, we do expect, according to what also happened last year, a much stronger Q4 than the first part of the year. I move now to page 16, digital trust. You know, what has already commented during past conference call or during meeting, we got all together, you know, it's now, I would say, 10 quarters that we are recording a steady growth in both revenue and even more the capability to go faster into ABGDA. This means that You know, the size of digital trust now is quite significant. The revenue went up 30 million, 70 million. It means 14.4% with strong capability, with a quite interesting percentage of recurring revenue, and the continued capability to acquire large clients is, you know, one of the main drivers. On top of this, both InfoShare and ISURA are able to improve faster the ABTDA than the revenue, and I would say here the operating leverage is basically helping this situation. Although we start from small numbers, our capability to export on top of the business we do in the countries where we have already a local company there, we are ready to export to international clients our solution, and this part is growing, basically is growing 50%. Again, we are talking about small numbers, but this is a confirmation. You know, for DRN, you know, we do expect to continue to grow at this, basically at this level, expecting to deliver results, you know, above what was, let's say, our original expectations. In cybersecurity, again, Q3 confirmed the positive indications of the first two quarters. cyber security business now has taken a clear route of continuous improvement and deep diving the figures, I would say within these figures we do basically see our traditional business, the traditional business quite flat, while all the growth is coming from pure cybersecurity services. This has occurred also in Q3, and compared to previous year, we do see significant growth in terms of revenue, well above the market situation, and this is very positive. as well as we do see a significant improvement of the margin. The margin went up 400 bps. It is quite an impressive result. And we can definitely say what we have anticipated during previous conference call, that basically compared to our expectation, we are, let's say, the original expectation of the investment, we are nine months later. But now, we are deploying exactly as we expected this growth. Also Q4 is, we forecast a very positive Q4 in order to end up the results according to our expectations. Business innovation, I can understand that looking from outside is something that need explanations on this, but we know what we have done last year. Last year Q4 was very strong. The level of portfolio we have now is encouraging and therefore we do expect to recover quite significantly in terms of profitability during Q4. Obviously, in this area, we have two trends that, you know, all trends was basically already expected. You know, we were already planning a reduction of rates that is obviously occurring accordingly to the budget law, but, you know, we are reacting with other businesses. And obviously, we were expecting a reduction in, you know, temporary export management solution, even though starting from July, the level of incoming orders of this area is improving, so we do expect a quite positive G4. Very positive information is here that The investments we have done in digital innovation with the acquisition of an answer planet are perfectly aligned with our internal budgets and so is perfectly aligned with the investment case we developed at the time of the acquisition. Obviously, the decrease of the profitability compared to the flat revenue we recorded is mainly driven by the increase of labor costs, but we do expect to significantly compensate the situation in Q4 where most of the revenue will come. marginal profitability will be much higher in Q4. So, now I leave, you know, to Joseph for final consideration and guidance, but, you know, we have in place all the action to work through the result that we expect in the guidance we are sharing.

Okay, I've done it. Thank you. So just to wrap it up, I'm on page 20. On page 20, I would like to reiterate what the Board of Directors has confirmed, which is also the guidance. The guidance in terms of 2023 versus 2022 on a reported base sees revenue growing anywhere between 11 and 15 percent, EBITDA adjusted growing in the range of 8 to 12 percent, net financial position over adjusted EBITDA 0.7, 0.8 times. I would like to reconcile this number for the market in order for everyone to be online. We had come out with a guidance in March of cash positive, obviously not including the acquisitions that we have completed throughout the nine years. And there's another moving part, which you see here on the note, which is also the lower proceeds due to the postponement by management of the exercise of mature stock options. So these two items, which are obviously the ones that are moving, bring the NFP over adjusted EBITDA to 0.7, 0.8 times, just to flatten any doubts and iron anything out in terms of that. Odon, do you want to say something?

Maybe on this point, to make, you know, Joseph was very clear here. I want to make, going back into numbers, So we were planning cash positive. Here we are planning 0.7, 0.8. If we estimate an EBITDA north, obviously, of some millions north of 100 million euro, it means that we are talking about 70 million, 75 million debt. 44 million came from Asherzia. 25 million came from From the FenceTech, we added the extra investment in the software of CRIP and, you know, the not-excess size of the stock options. So, basically, this accounts for more than 75 million, so this is how this is explained. Obviously, next year, we will have the full deployment of Ascelsia that definitely will help in delivering the results.

So that wraps it up. I would open the Q&A for any questions that you might have. Operator?

This is the Coruscant Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Alexandra Arsova of Equita. Please go ahead.

Hi, good afternoon. Thank you for taking my questions. A couple of questions from my end. The first one just a clarification on business innovation. So you mentioned that you expect a significant recovery in the fourth quarter. Just to get it clear, since we are already in the mid of the fourth quarter, you're actually already seeing this improvement, so we should expect a significant positive growth in the BDA in the fourth quarter for business innovation. So this is the first one. And the second one is just an update on your partnership with uh defense tech and uh if you see the probability of uh exercising your call option to maybe be increasing uh in uh i mean in the first half of next year thank you hello donna here uh definitely you know uh you know just to give you

a little bit of more color on the question of business innovation. I think it's already clear to everybody that Q4 is the driving force of the profitability of business innovation because this, you know, the finanza agevolata, automatica, as a business itself, worker, in the way that our customers have to complete their investments and put them up and running before the year end in order to have the opportunity to cash the grant when they are going to file the tax declaration. So this is the natural way why these results are improving in Q4. So this is a rushing to forward where our clients are rushing to complete their investment and we got the right to bill our services to them when their system, their investment are up and running. So it's a mutual benefit of our self and our clients to complete the activity by the end of the year so they can cash their grant during the following year. So having, you know, trying to clarify why we are stretched over the year end, we have to consider that compared to previous year, you know, the reduction of rates is impacting part of the activity. And in some way, some clients reduce their, you know, willing to run this investment. approaching Q3, some of them came back to us and they are re-evaluating this opportunity, so we are running, we are in a rush to try to complete with them this investment. Indication from the revenue of the month of October is positive compared to previous year. And honestly, you have to consider now that already Finanza Ejevaluata Automatica has a very high profitability because we have to remember that then when warrant was basically only in finanza geovoltaica automatica, the EBITDA was in the range of 50%, now we are considering basically that we are recording a lot of revenue while the cost, because we are basically cost of people, will be only one-fourth. So the profitability of Q4 internal EBITDA of this business will be much higher. So we do expect to convert in ABTDA, more than 60% of the revenue we generate. So we do expect the same event. You know, our board of directors today review all the information from the business management and therefore, you know, the board and all of us, we are aligned to confirm the guidance. As we move to defense tech, Obviously, you know, after, you know, the approval of the balance sheet of 23, our board of directors will convene in order to analyze and go and taking the decision of whether or not to exercise the code. Obviously, we are working with different techs within the clear limitations we have as we are talking about the two listed companies. But, you know, we can say that already some, let's say, commercial cooperation between the two companies is helping and is a positive signaling indicator. We will work again together within all the limitations to better understand each other and explore all the opportunities of synergy, but I would say it's not going to be a business of cost synergy, but will be an opportunity of development, cross-selling, and developing and exchange capabilities from the technical standpoint. So far, I have to tell you that I do see a positive indicator and As of today, no one negative indicator. But again, at the end of the day, it will be the board that will convene after the approval of the balance sheet to analyze the situation and taking a decision.

Very clear. Thank you. The next question is from Russell Pointon of Edison. Please go ahead.

thank you uh good afternoon good afternoon joseph a couple of questions if that's okay first of all i'm just trying to square a couple of the comments off you're you're confirming overall guidance for the year but i mean in your comments you state that digital trust is you know expected to continue growing as above the original guidance um so and Does that mean that actually you're going to get to the overall group guidance by different means, i.e., I guess what I'm trying to get to is business information going to be weaker than you originally anticipated at the start of the year? The second question is, it is on the digital trust that you notice performing 12, which is a couple of percentage points above the 10% you spoke about at the start of the year. So could you give some indication of What is driving that being so much better than you anticipated at the start of the year? And my third question is, there hasn't been much activity on the share buybacks in Q3. Just be interested in your thoughts on that, given where the share price is. And similarly on M&A, just be interested in your thoughts there. The balance sheet is going to be in good position by the end of the year. Is it more caution on your side with respect to the outlooks, valuations of the companies and the set-toys, or is there resistance on the part of the companies you're looking at?

Thanks very much.

Russell, good afternoon.

Odone here. I have well understood your question. Digital trust is performing slight above our expectation. Honestly, growing very close to 15% in terms of revenue is above our expectations. It's above our budget. And at this level, as anticipated, the profitability, the EBITDA adjusted is growing much faster. You are telling me why this. Definitely, I would say that how our projects continue to perform very well. Last year, we have to remember that inflation in the beginning of the year was quite a potential significant issue. So, we put in place in the early part of the year the opportunity to improve pricing, especially on the OTS when possible, and we do that, and this driving result. Inflation now is slightly lower expectation, and we were able to manage it on the cost side, also negotiating very well with our supplier. And I would say we were able to continue to develop digital transformation management solution with some large customers. So the combination of slightly better performance on different items drove us to this. There is no any one-off positive thing. There is no any magic touch from the magic. They are hard work. For example, they had slightly above CAPEX than expected because they decided to improve the operation, to be more and more focused on the core business. They are outsourcing all the infrastructure management. So we went into an agreement that was also public with WIPT. And so this is undergoing is going to be complete soon this will allow even more more focus on product solutions development and a client server while you know we are moving to the third party the management of the very large and complex infrastructure so i would say This growth, as you can see, is steady. This growth is happening quarter by quarter. We don't have a significant up and down compared to the previous year. It means that the company and the business unit, I'm talking especially of InfoServe and Visura, are very solid, are very well managed. They have a strong management. They put in place operational targets of improvement, and they are able to deliver. So, this was the first question. Joseph, are we on the second one?

B and M&A. Yeah. B, buyback and M&A. Yeah. So, in terms of, Russell, in terms of buyback, obviously, we know where the share is. you know, there's not much more that we can comment on it, right? When it comes down to making strategic decision, it is a decision of the board. We are evaluating all the options. I guess it's just more of a wait and see type of scenario here. In terms of the M&A, again, you know, I mean, we would love to give you so much more detail, but, you know, it takes the time that it takes, right? you know, when you start evaluating assets, we are constantly evaluating assets and all the different business units. And therefore, when the time is already, we can then obviously disclose.

If I can just add, you know, although we just invested in the minority part of defense tech, we have a call from for going to majority. And this is going to be once, when it's completed, a major investment, because we are talking about 125 million. So for cybersecurity, you know, the focus and the capital allocation as of now is this. For digital trust, we completed in July the acquisition of Asherzia, putting a foot into not only the UK market, but having a nub of development in Pakistan, as well as a presence in Middle East Africa. Very important is, as I already mentioned, that Asherzia is a solution for on-premises solution, and this combined with the capabilities of Infosys has led to an important contract we are going to... We signed, but we cannot yet disclose, but an important contract we got internationally as a combination between capabilities of Ascertia with capabilities of England. We have done this. Obviously, in digital trust, we are very open to analyze any opportunity that comes, but, you know, we are not in a hurry. We have said to Rob, who just acquired Ascensia, we need to find the right deal to be done, and we are interested in these amounts for something that helps us to bring really a significant improvement. We are, our eyes are very open and we are looking at potential opportunity when something will come, obviously, will come to the market. Same thing is on business innovation. We are progressing with, you know, the acquisition we have done. And we are looking very actively in the European markets. We are evaluating some opportunities, and we are confident that one of these opportunities could come to the end. If you ask me when is M&A, but we are both working very actively. Financially wise, we are in a very healthy situation, and so we are looking around the market for interactive opportunities.

Yeah, maybe to complete that, remember the two business units, both BI and Digital Trust, if we look at a pan-European

market they are very diversified right i mean there's the market is extremely fragmented and therefore any further consolidation is probably welcomed i'll leave it there because we can't really comment more okay joseph uh just go back to that first question um my main question was if you're if you're confirming the guidance for the year but digital trust is better does that imply that business information is not going to do the revenue that you expect at the start here. Because when I read the financial reports, the cybersecurity and digital trust, you do talk about the greater rates and the greater rates for the next few years, but you don't do that in the section for business innovation.

Russell, you have seen that... digital trust is growing, like we said, slightly above our expectations. So when we talk about a business unit that could do, let's put 15 million euros slightly above, we're talking 1, 2, 3 million, I don't know. Obviously, this is what, you know, we are growing 15% in terms of EBITDA, it would be not significantly different DRN. So, if we add the guidance, it would be one or two points less. We are talking in absolute value, one or two million. This is what is going to happen. In the same way, it's not going to change the picture of business innovation if instead the gain of 50 is going to deliver 48. What is going to change? I have to tell you that we are very glad that the improvement of the slightly below performance are in a very, very limited variance. But when we started the year, the situation was also from the macroeconomic standpoint less negative. Also, the GDP was expected to be slightly better. So, we are very happy that in a context like this, you know, we are still confirming to be within the range that we share with the market at the beginning of the year. Obviously, as in any company, as in any business, you may have something that is performing slightly better, something that could perform slightly below our expectation. But there is no major difference everywhere. And on top of this, you know, we share with the market a strong guidance in terms of increase of cybersecurity. And after nine months, we are growing 66%. on small numbers, it's very clear because numbers are there, small numbers, but still is on track with expectation. If we grow like this, the growth will be between 35 and 40% at the year end. That I would say is going to be a huge number. So, some adjustment may come, some orders can come by DRN, some revenue could come later or before. It's not changing the picture. The next, after nine months, is continue to convert and to generate significant cash. Our major pillars are there. We are experiencing a delay in the business innovation, but again, the quarter that is making the difference is Q4. Q4 is there, as I answered to your colleagues a few minutes ago, you know, we have encouraging information. But again, I will tell you, if T-NEXA will deliver one million more or one million less of ABTDA is not making a major difference. What is making difference is our capability to continuously deliver, continuously to increase double digits in the two markets that are growing double digit and we are performing much better both in digital trust and in cybersecurity compared to the market. We continue to deliver. We continue to invest. We continue to deliver aligned with our expectations.

And, you know, just to wrap it up, as a reminder, all this growth is purely organic. We always need to remind the market that this stuff is all purely organic. Thank you.

Any further questions? No, thank you. Thank you for being so concise. Thank you.

No, no, no. It's a pleasure, Russell.

The next question is from Isacco Brambilla of Mediobanca. Please go ahead.

Hi. Good afternoon, everybody. Just a couple of quick questions from my side. First one is on digital trust with first-half results You provided us a bit more of granularity in terms of growth pace for off-the-shelf and DPM. I'm wondering if you can give us the same data on a nine-month basis since it looks like business accelerated in the third quarter. Second question is on M&A. You already elaborated that. a lot of money on these, just a follow-up. We saw some deals being completed recently in the digital trust space, apparently also regions which were of interest for you. Is there a cap on your side in terms of multiple you are willing to pay, and so you are getting out of the transactions because of valuation for the time being?

uh ciao you know talking about digital like i said that ots is performing very well but you know also dtm we were able to collect quite significant contracts also in this in this area so i would say that we are not honestly in a pure consumer market. So we do see, we look at our business at least on an annual basis. So in one quarter, we may have slightly better in the OTS, but then if a large contract comes in the following quarter, it rebalances. Both parties are growing very well. And in DTM, we have to remind that each contract we get, we get, you know, some one-off opportunity in DTM in terms of revenue, but it starts a recurring revenue there. So, again, we have to look at the good picture. In any case, both areas are growing very well. And, as I mentioned before, is increasing also, let's say, the DTM at international level. So we are selling, starting from small number, also solutions and products on a DTM path to some clients around Europe. And this is also a very, very interesting indicator because going to sell a DTM solution moving from Italy is going to be quite different. Obviously, we are talking about the countries where we do not have a company there. But this is very positive. The last question was emanating. On the M&A, yes. Again, we are interested in looking at targets where we can really brought in that country the opportunity to develop our solutions. you know, because if not, it's like acquiring just an asset in the digital trust. So our strategy is in each county to acquire what do we have, and this allows us to be immediately up and running to have the right authorization and certification. But then the asset has to be the right platform to allow us to develop our solutions. So I think that with these explanations, you may understand why sometimes some assets that could be of our interest has not been. On the other hand, on the multiples, you know, the world around us has changed, and therefore if sometimes multiples above what we, you know, more than multiples, I'm looking at the DCF. If the DCF is not allowing us to run an investment, we don't do it. In our DCF, we put also synergies, opportunity of selling our solution, and so on. So this is something that should help to provide you the picture of some of our decisions.

Thanks, Odone. Very clear. One quick follow-up on the first question. So, over the past days, the announcement of the agreement for InfoChart with Stellantis for Gosign. Could you just remind us if Stellantis is now a brand new client for Tinexta or if it was already in your customer base?

Exactly. As a reminder, Infojet is a leader in all the major verticals. We're talking about the banking, we're talking about the telcos, utilities, and above all, the automotive. We already have extensive, I would say, connections with Stellantis, the group, and other major brands, but I think that the key takeaway from the contract that you heard, which includes over 10,000 dealers around Europe, is that our technology is extremely at reach, right? And therefore, on one side, you have the flexibility of the solutions. On the other side, you have the trust, right? We are the largest certification authority in Europe, and a big group that selects this type of company like Infojet means that they really want the highest standards when it comes down to security and trust. So based on that, I mean, this is another confirmation, obviously, that InfoCert is being chosen constantly from major groups, medium groups, or small groups because of the exceptional offer that we have.

Very important to understand that looking at the business of InfoCert, you know, one contract is not making the difference next quarter, of next two quarters, because you may have a one-off, but maybe one year we got with Stellante, the year before we got with the public body, with the major Italian groups and so on. But what is going to be important? This is why, the reason why we have a steady growth well above double digits is that if things will move properly, this will be further recurring revenue. And so this will help us to continue to keep a steady growth. This business is not the one-off, but it's the base, the installed base we have that is generating revenue quarter after quarter, providing us the opportunity to invest more. in improving our solution and to allow us to create more and more a gap between our solution and the solution of our competitors.

Thank you, Isak.

The next question is from Chandra Sriraman of Stifel. Please go ahead, sir.

Yeah, hi.

Can you hear me?

Yeah. Yeah.

Perfect. So thanks for taking my question. Just a couple from my side. Firstly, you've had the cybersecurity business for a while now. It's doing quite well. Can you talk about the cross-selling that you have managed to achieve here in this business? Are you seeing some significant improvement in cross-selling across digital trust and cybersecurity? That's number one. And number two is in terms of digital trust, are you seeing, you mentioned that not a single contract has made a difference. Are you seeing some systemic change in terms of your ability to gain market share in this business off late in the last few quarters? Anything to highlight there would be super helpful. And lastly, in terms of just a follow up on the digital side of things, The business is now becoming a meaningful contributor. It's now 66% of EBITDA for the first nine months. How large can this get?

How do you see this business in the medium term? Thanks.

Sorry, the line was not very clear, so I tried to summarize with Joseph.

Yeah, so the first question, Chandra, was about cybersecurity cross-selling between digital trust and cyber, right? The second was about if you can give us some color on digital trust market share gains. I think that was pretty much the questions, right? Am I missing anything, Chandra?

Yeah, there's a last one, which is in your medium term plan, how large do you?

Can you hear me?

Hello? Yeah, in the medium term, where can digital trust go, right? That was the question, right?

Yes, exactly.

Yeah, yeah.

Yes, here, you know, as we announced it last year, No, early this year, I do not remember exactly, you know, basically Infocet and Yoroi went through a joint development of the product. It means that in Italy we have the electronic certified email, and this kind of email became not only certified in terms of trust, but became also cybersecurity. So it means basically that we are the provider that is able not only to certify the sender and the receivers in both ways, but also to certify that the attached documentation has moved from one side to the other in a total cybersecurity way. This is what we brought to the market as unique proposition and yesterday we have our sales convention and this was shared that definitely the results of this cooperation and cross-selling went very well. Obviously now every time one of our companies is delivering projects between to our customer is we are talking about cyber secure solution. The solutions from cyber security are the solution that digital touch is bringing to the customer. On top of this, I have to tell you that within the grow of the cyber security, is happening exactly what we were expecting when we acquired Corvalis, Yoroi and Svoskan. You know, Yoroi and Svoskan are players very well recognized for vertical capabilities on cybersecurity, while Corvallis has a strong long-term relationship in providing IT services to large corporate clients like Bank & Tesla, like Unicredit, like Unipol, and whatever. Now, we are seeing more and more contract within this large customer and cybersecurity and this is exactly what we do expect. And this is the reason why we were able to grow within cybersecurity in a significant way.

All right, so I'll take the other two questions, Chandra. So, you know, market share, I understand your concern about the market share, right? But the best way we've always represented that is also been reported in our prior capital markets they're not talking about this year and done the prior year what we do is in the best way you know to to to analyze it is on a revenue base right so I still remember that slide where we were showing both at an Italian level as well as at a European level where we were and obviously we ranked number one in terms of digital trust and when we when we analyze those revenues were taking in consideration and the digital transformation market, right? So in other words, I agree with you. We are now reaching a sizable amount of revenue. If I look at the nine months now, digital trust is now north of 130 million. So you can see where we plan to land this year, right? I think the most important takeaway here is the fact that we, and we mentioned this, you know, prior, you know, during the call, that it's been consistent you know, 10, 15 quarters of growth. I mean, we've had the opportunity of growing mid-teens. And, you know, to kind of answer your third question, which was, you know, where do you plan to see where you see this business You know, we definitely see this business growing on an organic base. That means without any acquisitions in the mid-teens, right? That was the number that we gave out during the Capital Markets Day in March. And, you know, there's no reason why this division shouldn't be growing in that direction. On top of that, obviously, you can add all the M&A you want, granted that the M&A is obviously of our interest, right? Because We want the M&A to be accretive, not just from a financial standpoint, which is a given for us, right? Cash flow is our fixation, but also from a, you know, strategy, service, and product standpoint, right? So, you know, just to give you a quick answer, you know, the overall organic growth is something that, you know, is absolutely to our reach when it comes down. And when I'm saying organic growth, I'm talking about mid-teens in terms of EBITDA, and that's where, you know, we projected the growth. You know, we'll see where the year ends, but I think that's the best type of answer that we can provide right now.

Chris, thank you.

The next question is a follow-up. You're welcome. Excuse me. The next question is a follow-up from Alexandra Arzova of Equita. Please go ahead.

Hi. Sorry, just a very quick follow-up. Two questions. from the visibility we have today I know it's a little bit early but how you see 2024 also considering the indications you gave during your business plan at the beginning of this year so you are still confident in what you said some months ago and the second one so previously you mentioned that if you of course exercise the call on defense tech, you will cash out an additional 125 million. So doing the math, you will be close to two times net debt to a BDA after the deal, if the deal is completed, of course. So you will prefer to maybe wait and leverage a little bit before doing additional M&A, or do you believe that this is not a threshold, two times net debt to BDA, And so, which is your target leverage? Thank you.

Yeah, Alexandra was on here talking about the leverage. You know, historically, our group always thought that a 2.5 times EBITDA could have been the maximum level to put the leverage. So, obviously, if we are going to run the additional cash out is going to be not 125, but early estimate is talking about 100. But any case, so still we are within our parameters because on top of DCR forecast, you have to include the shares and then you have to include the defense tech. Having said that, this is. I do, in terms of your correct question on potential limitation on MNA, I would say no, because I think that obviously we will evaluate if the 2.5 times, you know, could be, you know, evaluated if we could go slightly above. In any case, we have to remember that already one and a half years ago, there was a resolution from the shareholder meeting for which the board, the director, is empowered to call for a potential share capital increase up to 100 million euros. So this is in the power of the board. So I have to tell you that if a major opportunity will come, the board of directors will look carefully to all the options that we could put on the table. So I think that, you know, I strongly believe that we can have full support from the bank to go also above, but then the board will decide what to do. So here we are and I do not see the board having the view to limit our M&A policy.

As a reminder, we went over this during the capital markets day. The way we carry out M&A, some of the major requirements, you know, according to Tenexa, are the fact that these assets need to generate cash. So, as a prerequisite, this means that when we buy, we may reach a momentary peak in terms of leverage ratio, which would then fall down in the following year or year and a half or so. Okay? Thank you very much. On the second question, Sandra, on 2024, we will reconvene. And once we have a better picture of the end of 2023 and the assumptions for 2024, we will make it clear to the market.

Also, the perimeter has changed because of the Ascensia. And so we will do as usual.

Thank you very much.

Thank you, Alexandra.

The next question is from Andrea Bonfa of Banca Acros. Please go ahead.

Hello, good afternoon to everybody. Ciao, Donna. Ciao, Joseph. Very quickly, most of my questions have already been answered, so I got, once again, I would like to have a clarification.

I hope so. I hope so. I'm joking. Please, please, go ahead.

um now again on the higher net debt for the year and uh you you left us with the 0.20.3 at the end of the semester there is definitely the acquisition of defense patch defense tech which is adding 25 million but there is another shortfall of 20 25 million which i don't get because the treasury share were already included in the previous guidance so is any item particularly worth mentioning, or where is the delta?

Yes, probably we were not connected at that time.

We said to the market, cash positive. Let's assume it was 5 million, 10 million, whatever. Now, if we are going to be in the range of 0.7, 0.8, we are talking about roughly 75 million to make it around numbers. Now, 44 is a share. Let's say 45. Plus 25 is... defense tech, and so we land to 70. Then we have 10 million investment in grief software, and then we have less cashing of about 50 million from not exercising the stock options from the management.

Okay. Thank you very much indeed. You're welcome.

Mr. Mastragostino, there are no more questions registered at this time.

Thank you very much. We appreciate your time, and we'll reconnect for the fiscal year 23, which will be announced.

Thank you, everybody, for this call and your attention and the questions. Obviously, we are available.

Anytime.

Anytime. Bye. Bye. Have a nice weekend.