Nexi Spa Azioni Ordinarie

Good afternoon. This is the Coral School Conference Operator. Welcome and thank you for joining the next third quarter 2020 results 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, please signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Paolo Bertoluzzo, CEO of Nexi. Please go ahead, sir.

Good evening and welcome to our results communication for the first nine months of 2020. I'm here as usual with Bernardo Mingrone, our CFO, Stefania Mantegazza, judge for investor relations, and a few other members of our team. Tonight, we will comment the results for the nine months that we have anticipated earlier in the day. Obviously, we'll be covering the volume dynamics that we have been seeing over the last few months on the back of the COVID emergency. Obviously, we'll talk about the financials for the quarter and then a month, and obviously we'll also take Q&A. We'll have a Q&A session. We'll answer your questions as usual. In our communication earlier today, we've also anticipated the fact that we are progressing our conversations for the possible merger with NET. We have extended the exclusivity period to Monday, Next week, conversations are progressing well, but we still need a little bit of time to finalize certain aspects that need to be finalized. As a consequence, I prefer to anticipate that we will not be able to answer questions on this topic because we really prefer to do it if and when the communication on this possible deal will be complete, and therefore we prefer to to have a much deeper conversation, a much richer conversation with all of you once we can provide the full set of information, which is well deserved given the importance of this possible deal. So now moving to results before I jump into the content, I think there are two key messages for these results announcements. The first one is that as we were navigating through the different dynamics of the COVID emergency, in the third quarter, our results were, I would say, pretty strong. We came back to revenue growth and also quite material, I would say, to EBITDA growth. It is also slightly growing for the year to date. These results are a bit better than what we were expecting on the back of better volume terms, but also a few other things that have been happening in the period. This is message number one. The second message, the second comment has to do a bit more with the dynamics that we've observed so far during the first wave of COVID. and that we believe provides to us two important learnings as we think about these new wave calls. The first learning is that the recovery from lockdowns and from in general the restricted measures can be quite rapid. Obviously, it varies by sectors, varies by type of customers, but actually We've experienced a recovery of volumes that has been actually faster than what we thought. The second, I think, learning is that this normally comes also with a more and more visible shift from cash to digital. I think there is a broader shift from physical services to digital services, but digital payments are clearly a part of this, and therefore we see customers On the consumer side, more keen to use digital to pay, and merchants. On the merchant side, also more keen to accept digital payments, given the fact that the benefits are clearer and clearer to both. Now, going into the results, page three of the presentation, As we had anticipated throughout the recent period, we've seen a strong recovery from the lockdowns that we experienced in the spring period. From there, you remember we were at minus 50% year-on-year in March and April. From there, as the lockdown measures were released, we saw a quite rapid improvement of the situation. with a particular acceleration, I would say, end of July and in August, with the acquiring volumes on Italian cars that were basically back to pre-COVID growth levels in the month of August. Despite the fact that clearly the travel sector more in general was not performing yet in line with last year, and despite the fact that international travelers' contribution, so the inbound business has been throughout the summer lighter than in the previous years. As far as transaction volumes are concerned, in the quarter, we saw as a combination of acquiring and issuing a minus 4% versus the same quarter last year. Year to date is about a minus 12%, which obviously is affected by the minus 50 that we saw over a couple of months in March and April. So this is the situation basically up until the end of September, beginning of October. Obviously, as in many other countries around the world, probably a bit later than many other countries around the world, in October, we saw the first signals of progressive slowdown in volumes, starting obviously, again, from the reduction in visitors and in travel activities and entertainment activities more in general, and clearly, We see this continuing and changing, I would say, on a weekly basis as the COVID emergency develops and as our government is implementing new restrictions in the country. If we compare the measures with the measures that we saw in the first wave, they are quite different. for a couple of reasons at least. First of all, this time our government has decided to segment the regions in three tiers, red, orange, and yellow. You can guess what the colors mean. And this segmentation is something that is evolving. So every week or so, the government will assess the situation in every single region. This will depend, obviously, on the number of cases, but also on on the situation with the healthcare system and the ability to support the people that need support. Even in the case of the red regions that are the most affected, the measures that are being implemented, at least for now, and again, the situation may change, the measures are not directly comparable with the ones that we had in March and April. That is why we're calling here this lockdown a soft lockdown. the government has been more selective basically on the back of the learnings from the first round. Just to give you a few examples, basically all industrial production is not running. Obviously, wherever possible there is, and business activities are open, there is a recommendation to do remote working, but the companies have not been shut down as it happened in the past with the exception of companies such as ours that that are necessary because they provide basically super necessary type of services. Bars and restaurants are closed, but actually they're open for takeaway and home delivery, which was not the case at the peak of the previous lockdown. If you look at the categories of retail that are closed again, there are a good number of categories at this time have been allowed to remain open, not only the typical grocery stores, and pharmacy space, but also, for example, sporting goods or, for example, clothing for kids and a few others. So, obviously, we need to see how the situation evolves. The impact that we are observing at the moment in our volumes is, therefore, softer than what was in the past, luckily enough. data that was available when we did put this communication together was for the week ending on the 4th of November. It was minus 8% year-on-year on acquiring with a clear impact on the categories that are travel-related, entertainment-related, hotels, restaurants, cafes, and the usual suspects. A couple of last comments. Throughout, I would say 2020, so throughout the first phase of COVID, the recovery, and now again, we see strong growth in the commerce sectors that are not impacted by COVID. This growth is around 35% in the quarter and year-to-date as well. while actually overall the e-commerce overall performance is impacted by basically the weakness, the visible weakness of the travel-related sectors that in e-commerce do have a very important weight, about 40%. Last but not least, as I've anticipated, we continue to see signals of positive acceleration of the transition from cash to digital transactions. Now coming on the next page, on page four, on the results. EBITDA for the quarter was up 7% year over year at around 167 million, and it's up 0.4% for the nine months. Revenues were also up about 1% in the quarter at around 276 million euros, although still a bit below last year, minus 3.6% to take the nine months. Basically, we've been progressing our operational activities, our operations according to our plans. Merchant services and solutions, that is more than half of our business, we see a continued positive growth of post installations that create acceleration in mobile posts to support merchants that want to deliver at home and in any case need more flexibility to serve their customers, a step up in e-commerce and in digital services more in general. On current digital payments, we continue to see an accelerated interest for international debit. That is a strong product for e-commerce transactions as well and more in general digital life. At the same time, we continue to roll out new capabilities for the national debit scheme, Bancomat, that is basically improving rapidly in that sense. as well as we see an acceleration of mobile payments and contactless transactions. As far as digital banking solutions are concerned, around 10% of our revenues, we basically continue to see an extension of our next open banking ecosystem, both in terms of banks and third parties coming on board of our products and services, but also in terms of extension of the partnerships. I think we have today around 25 partnerships, ranging from the larger digital players, such as Microsoft, to the smaller but fast-growing fintechs like Miniga or Alight. At the same time, we're also progressing, I would say, very well in the rollout of the more advanced solutions, both in digital corporate banking and corporate payments more in general, and self-banking. On the cost side, we've done what we're committed to do in terms of trying to balance as much as possible the pressures on revenues working even harder on the cost side. If you remember, we have announced our 100 million euro cash cost containment plan. Bernardo will give you a more specific update on that one, but the combination of that program together with our usual efficiency work is allowing us to reduce costs year to year for the nine months by 8.4%. Last point, on our performance, the net financial debt rate At the end of the period, it was 3.7 times EBITDA already improving from what it was at the end of the previous quarter. One last comment before going into the volume dynamics. As you remember, we've announced the possible combination we see only a few weeks back. We are progressing with the work that has to be done on transaction documentation and confirmatory transactions. due diligence and respect to sign the binding documentation over the next couple of months and close with all the necessary authorizations around the third quarter this year. In the meantime, we just communicate the results that have been reported over the last few days by SEA. We'll try to do to be as much as possible to start to give you visibility of what the profile of the new NEXE is becoming over time. Also see a good result, EBITDA growing about 8% year-on-year in the quarter and broadly in line with last year over the nine months, and revenues up 2% point in the quarter and slightly better than last year over the nine months. There is an attachment page that basically replicates the communication of FIIA, and obviously on their website you can find more information. Now let me jump into the volumes, page five. This is the usual page that we've seen in the past. This is the combination of acquiring and issuing volumes, seven days rolling numbers represented as a year-on-year change for the rolling week. You remember March, April were around minus 50. You see here quite rapid recovery that we've already commented in July up until the end of July. Actually, an acceleration at the beginning of August in particular back to growth levels similar to the ones that we had pre-COVID. And now I would say especially from August with international travel starting to have issues, starting to slow down a bit again. And then from October, I would say a more visible slowdown. And we're now running around minus 8, minus 9% on the back of the new measures that I have described before. The following page, and here we start to try and open up the different elements to try to give you as much insight as possible as we've done in the past. Page 6. It gives you a snapshot specifically now focusing in acquiring where we have more detail. In here you see the clear dynamics in between the national cart, the Italian cart, and therefore the Italian customers and how they've been spending in our merchants throughout. That's the lighter blue line. But you also see the dynamics that we have observed on the visitors, so the foreign card spending on our merchants in Italy, and that's the gray line. You see that as far as the Italian cards are concerned, they came back to positive already from June, and they accelerated in July and August. So we had a good period in August, basically a double-digit. growth it is in line actually even better than what it was before despite as I said before some weakness in certain travel sectors as you can imagine then it did slow down a little bit around the five or six percent and we're just seeing some slowdown at the end of October beginning of November but I would say definitely good resilience of the Italian cards consumption at the same time Now, the impact of COVID is super visible on visitors and foreign cars that have been going down at minus 95% at the peak of lockdown, and then they did start recovering. I would say slowly, but also consistently. You see very regularly up until August, where they arrived at a minus 40%. And then as international travel restrictions were going into place and COVID was starting again in some of the most important countries for our tourism, you see that we have seen a further deceleration, and we are now running at a minus 60, minus 70% year-over-year. I think it's worth remembering that the weight of visitors is normally important for an action for our country more in general. And here in the table below, you see what is the weight in terms of total volumes for There is a peak normal in the summer period with more than 20% of the volumes coming from visitors. As we go more towards the winter, it's more around 10% to 15%. October was already 15%. Now, let me give you, as usual, a breakdown by sectors. On page 7, we gave you exactly the same snapshot that we gave you in the past with updated numbers. If you allow me, and it's for your reference and you have the comparisons with the data that you gave in the past, if you allow me, I would comment it on page eight, which is exactly the same set of information simply plotted on a graph that I believe is particularly telling visually to help you to understand what is happening. Here again, the blue line is the total acquiring volumes that we see. The green line is what we call the basic consumption services, and therefore things such as groceries, medical, retail, utilities, services, and so on. They are the largest segment, about 35% of our volumes. The gray line is the line on generic and discretionary consumption, products and services, clothing, household, laundries, beauty, these type of things. And last but not least, the red line is obviously the one on high-impact consumption products and services, and mainly services, I would say, like hotel and restaurants, travel, transport, entertainment, bars, and alike. And here you see how visible the dynamics are. The green line has been obviously positive basically throughout the period since the beginning of the year. and is remaining positive. Actually, over the last few weeks, we've seen a very visible acceleration. We're now running above 20% year-on-year growth. Obviously, this is also a little bit driven by the fact that as restaurants shut down, probably you buy more food to eat at home. But honestly, the speed of growth at the moment is so visible that I think there are good reasons to believe that there is growth. a shift from cash to digital payments that is happening here. The gray line is probably the most telling and the one that is the most correlated with the lockdown measures. You see that as the shops were closed in March and April, it was a minus 80, minus 90%. As the shops did reopen in mid-May, you see a rapid acceleration back to a better space. Then a slow recovery and it went back to positive speed. in August, and now more recently they started to suffer a bit more. Here it is interesting because when you look at it under the more detailed sector, there is one sector that is suffering the most, that is clothing, that as you can imagine is also a little bit messed up with different seasons and fashion specific dynamics here, while I would say the majority of the other sectors are still in positive territory. And last but not least, the red line is self-explanatory. Obviously, with lockdown, it was minus 90%. Then, again, gradual recovery. Here, this is the sector where you have the highest impact of foreign cars and visitors. They did recover up until August, close to positive in August. Actually, if you take Italian cars in August, it was quite positive. Restaurants, hotels, most of the categories went back into positive for Italian cars. So there is a minus only because of the impact of the missing 40% of visitors. And then actually as the new measures went into place, you see that the degradation started and we're now running at about minus 40, minus 50 compared to last year. So these are dynamics. I think that they're explaining what is happening here more than any other detail or comment. Page nine, before going into results, A quick update on what we are progressing on our commercial activities with a little bit more focus on the ones that are related to the current situation on merchant services and solutions. We see a continued positive growth on post installations with new terminals or new merchants coming in. Mobile post, as I said, is a good solution, which is having a lot of success in this period given the environment. Continued growth. progress on e-commerce, and continued progress more in general on all digital properties, including the Nexi Business App, which is our business intelligence app. As far as card and digital payments are concerned, good acceleration in international debit, continued evolution of the capability of the national debit product, and accelerated, I would say, pipeline of digital projects more in general with most of the banks. Here, it may be interesting to underline the fact that mobile payments year-on-year are In the third quarter, we saw basically the volume stripling, so plus 190% versus the same period the previous year. And we see a continuous acceleration in the use of contactless from 38% pre-lockdown to 45% these days. As far as digital banking solutions are concerned, last but not least, as I mentioned, we see progress on, I would say, in particular, most of the digital front. One last comment on the government initiatives. You remember that in December last year, the government decided to implement a list of measures. Five are the key ones to support the transition from cash to digital payments. Obviously, they're doing it with a double objective, accelerate the modernization of the country, monetize the digitalization of the country, perfectly depending on the benefits that come This creates for citizens and enterprises and public administration and the entire country. At the same time, clearly, the government sees this as a way to reduce the impact of the black economy and therefore create more transparency in transactions. Three out of the five measures already went into place. There were two last measures that were postponed. They were supposed to be implemented in the summer. The government, I would say, for very good reasons, decided to postpone them. And now they should go in place at the beginning of the new year. The two measures are the following. Let me start from the second one here. In January, we should see the beginning of the lottery on receipts. Basically, on a periodical basis, there will be lotteries with prices increasing. Most of the prices you see, about $45 million, would be for people that are paying with digital payment methods, obviously cards being the main one. That should go in place in January. The one instead that may be starting earlier in December, at least with a test, is actually the cashback mechanism. Now the mechanics are fairly well-defined. It works as follows. for every purchase that you do in physical retail, so e-commerce is excluded, for every purchase in physical retail, you will be receiving a cashback on a periodical period. So they split the period in six months. At the end of the period, you will receive a cashback of about 10%, up to 10% of how much you spent. There is a cap for this that is around 150 euros per period. There is also a cap for each eligible transaction up to 150 euros. And it's clear incentive to use the card as much as possible because you need to use the card at least 50 times in the period before you're eligible for this cashback. And clearly the mechanics are well designed to promote not to just using the card once to buy something expensive but actually the other way around use the card as many times as you can for your daily life and clearly this is going in the direction of basically making digital payments normal as an everyday payment tool. The budget for this is quite important for the period December 2020 to 2021 is going to be about 1.750 billion euros. The period of December is going to be probably a bit more than a trial, if confirmed, because we're talking about only about a few minutes, but then it's going to be big next year. And at the moment, there are budgeted an extra 3 billion for 2022. Let me stop here and hand the floor to Paolo.

Thanks Paolo and good afternoon to everyone. Moving on to slide 11 where we summarize the group results. I think we had a very strong set of third quarter results that highlight the great resilience of our businesses as it emerged from the discussion Paolo had with regards to the volumes and the and NEXI's operations during such difficult times. I think it has also highlighted the high level of elasticity of our business, how quickly we are capable of recovering following the trough we experienced during the lockdown months in the spring. And we have had a number of data points which suggest that there is a much higher propensity to pay by by cards and with cash than in the past and a higher growth rate in terms of penetration. So this is translated, as you can see in the charts on page 11, to a growth of revenues in the third quarter of 1%, closing the quarter at $276 million. Revenues have been growing within the quarter already since August, and this is five months ahead of what we had originally estimated to be a return to growth in revenues. When we discussed first half results back in July, we indicated that we'd expect revenues to start growing on a year-on-year basis towards the end of the year, December. This started earlier thanks to the recovery in volumes that we were discussing just a short while ago. Even in terms of the nine-month figures, you can see revenues are down 3.6%, and this is at the lower end of the range we had identified back in July, which was to have revenues decline in the mid-single-digit area. With regards to EBITDA, clearly we benefit from the uplift of performance coming from the cost management initiatives we have discussed with a number of you and back at the time of the announcement in the first quarter and again in July. 7% growth in EBITDA, closing the quarter at €167 million, which is obviously a good result for us. And if we look at the full-year performance or the year-to-date performance of the third quarter, so the nine months to 30th of September, we also have a return to growth of the overall EBITDA closing the nine months with 429 million euros of EBITDA and an EBITDA margin which is accreted by about 200 percentage points, 200 of the basis points from 55% to 57%. Moving on to the divisional performance, on slide 12, We have merchant services and solutions. As you can see, volumes here performed well compared to the prior two quarters ahead of schedule, as for the rest of the business as well. I think it's important to highlight how, notwithstanding the improvement in the pickup in volumes, we still suffered from a low level of foreign travelers, particularly from outside the EEA, which impacted acquiring volumes. and also helped us from a business mix perspective defend the revenues because the lower the profitability of domestic card transactions on the acquiring side are more profitable, which is a silver lining of this lower level of volumes. We also have had the benefit of the protection mechanism built into the acquisition of the book from Intesa, which helped us move the impact of the dip in volumes in the first part of the year. And another positive mixed effect in the third quarter, which is as we had the relaxation of the lockdown measures at the end of the spring, beginning of the summer, we had a larger proportion of the transacting merchants, which are SME merchants, which have inherently a higher profitability for us compared to the larger customers which were transacting during the lockdown period. So this helped us perform well in terms of revenues. You can see in the quarter, acquiring revenues were up 3%, 251 million euros, and there's a slight disconnect with regards to the volumes, which are down 4.8% in the third quarter, if you look at international schemes, and down 13% for the whole year. The level of installations was also up during the summer months, ahead of what we had planned, and we have a strong growth in e-commerce. If you look at the e-commerce, which was not affected by lockdown, so excluding travel tourism, which tends to be mostly encapsulated with 35% year-on-year growth, which is significantly higher than what we used to experience in these sectors, closer to around 20%. Moving on to issuing on slide 13, here we have better performance in terms of volumes, and this is not a surprise given the fact that issuing is not impacted by foreign travelers not being able to come to Italy. and it benefits from Italian cards transacting online on platforms where it not acquires. Now here, conversely, the acquiring side, the fact that Italians not traveling, not transacting with Italian cards abroad, that lack of transaction volume impacts us negatively on the performance of revenues because they're higher profitability transactions for us. So we have a slightly different trend where volumes were up 3.7% if you look at the third quarter 2020 in terms of minus transactions, plus 0.4% if you look at the value of transactions in the third quarter, but revenues were slightly down 2.1%. This was also impacted by recovering volumes of the slightly higher mix of domestic debit transactions compared to international schemes, and again, those, from a business mix perspective, were slightly less profitable for us than international scheme transactions. But all in, I would say a solid quarter in terms of revenues for cards and digital payments, similarly to to merchant services and solutions. With regards to DBS, now DBS is not surprising. It's the least impacted by COVID given its greatest reliance on install-based revenue. We have substantially flat performance, I would say. We have growth in the quarter, 1.5% growth in terms of revenues to €29 million, slightly down year-to-date, minus 1%, better than the merchant services and cards, as I was mentioning. I'd say we were impacted to the extent that there was less work done on ATMs and other activities which required field work due to the restrictions which were still in place to a certain extent during the summer months. But this didn't stop us from working, as Paul was mentioning, on the digital side of things in a number of areas, including open banking, where significant progress was made during the quarter. Moving on to costs, on slide 15, we can see that we have successfully reduced costs on a year-to-date basis by north of 8%, in the quarter down 7%. If you look at HR costs, we're down 8%, and non-HR, 6%. On the non-HR front, I would highlight how the greater volumes you were speaking of earlier have hit us negatively on the cost reduction front. Greater volumes mean greater processing costs or payments made to our processing partners. These are obviously, let's say, good costs to be had because they contribute revenues. And obviously, withstanding this higher level of volume-related costs, we remain committed to delivering on our €100 million of overall cash cost containment plan. The other thing with regards to cost that is worth highlighting is that we kind of changed the mix of our cost-saving initiatives during the course of the year, I would say, as things evolved, basically, you know, making sure that we would, you know, we were reactive to opportunities or reactive to client needs. So we ended up spending a little more than we expected on the CapEx front in particular to support certain initiatives around online, omnichannel, around the certain initiatives which are in our mind particularly relevant during these COVID-related times and obviously remained, as I was mentioning earlier, committed to finding savings elsewhere in order to fund this change mix. We can see this on slide 16 where we talk about the The progress we're making in achieving the 100 million net cost results, where we are absolutely on target to deliver the full savings. As I said, the mix might be slightly different, slightly less savings, I'd say, on the CapEx front, slightly more on transformation costs or discretionary spend. Overall, I'd say the degree of achievement is pretty much in line with what you'd expect. We're two quarters in out of three. We announced these results. these measures during April or actually the beginning of May during the discussion on first quarter results. So we've had since April to work on these cost containment measures. We're now two quarters in out of three, and we are more or less two-thirds of the way there. We're ahead on discretionary spend. As I mentioned, this kind of compensates the lower level of achievement on CAPEX, which is kind of a planned and intended mixed change in order to continue our focus on all those investments as we highlight on this slide and key initiatives which are structural for us and will grow and will basically in the future grow in efficiency. So again, there's no concern with regards to achieving these targets for the full year. I'll end the financial section with a word on our strong cash position. As you can see, leverage has come down to 3.7 times as EBITDA has grown and cash generation has helped reduce the net debt position. This is down from four times at the half-year mark. If we just assume a similar kind of cash generation in the fourth quarter, you'll see we'll be towards the 3.5 times leverage, which is where we expect to be given the targets we set ourselves when we IPO-ed a year and a half ago. I think also the mix of cash and cash equivalents is improving. On the cash equivalent side, we have received unrestricted visa shares at the end of September, which in the process of the fact of being able to try to sell, we need to obtain certain documents before we can do so, but those will be transformed into pure cash during the course of the coming weeks. So having said that, Paolo, I would hand the floor back to you to conclude.

Yes, thank you, Bernardo. Let me just go back to what we said in the past around the outlook for the year. As you remember, we have suspended our guidance back in spring on the back of the arrival of COVID. And clearly we did a good thing because, again, the dynamics are still changing. changing on a weekly or monthly basis is really difficult to have a precise view of the short term at least. In July, with the staff results, we said, however, that we had a certain ambition for the year. Obviously, depending on the evolution of the pandemic, the speed of recovery, the dynamics of the sector, and all of that, It basically said two things, two major things. Number one, that we were expecting a possible return to revenue growth by year-end. And second, we said that if that was happening, we were still targeting an EBITDA for the year around the same level of the EBITDA of last year, around 600 million euros, actually slightly above last year, including the organic impact of the PESA. book acquisition and as a consequence of all the work we're doing on cost and capex as well, we're expecting an increase in our EBITDA minus capex with and without the contribution of the book. The only comments that we can make is basically on progress versus this ambition. As you've seen, we are already back to positive growth in the third quarter. Actually, we're positive in two months of the third quarter, both in August and September. And this is clearly ahead of our plan when we did say that we were considering a possible return to revenue growth by year-end. Actually, our simulations were seeing a positive number from more around November, December. and now it has happened in July and August already. However, as you can imagine, it is now a bit more difficult to say what will happen in the third quarter because it will depend on the evolution of the pandemic and, most importantly, the evolution of the measures that are going into place. As you may have read in the presentation, the measures that are in place at the moment are in place for the next year a couple of weeks and the government will decide if and how to extend them, intensify or actually soften them based on the region, based on the situation and so on and so forth. So it's really difficult to have a precise view for the next couple of months. Similarly, on EBITDA, actually EBITDA was already back to growth in the quarter, but was already back to growth year to date, which is actually, again, earlier What we're expanding, clearly, the dynamic for the next quarter will be mainly impacted by the evolution, again, of the situation and, in particular, through the impact that this will have on the revenues while we keep on, obviously, executing our cost containment plan. So let me stop here. And before taking your questions, let me just remind the two key messages that we wanted to make sure that we remain with you from this call. Number one, performance for the quarter better than expected on the back of better volumes and a few other things. A second key message is Let's keep in mind the learnings from the first round of COVID. There are two key learnings. First one is that volumes can go down faster, but they can also recover faster, especially in many sectors. Second lesson is one around the fact that the shift from cash to digital in our country is not only happening, but it's actually happening in a faster space than what normally would have happened. Let me pause here and take your questions again. Unfortunately, it's sad for us to say this because we always like to take any questions from you, but we will not be able to take tonight's questions on the next possible deal.

Excuse me, 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 Hannes Leitner with UBS. Please go ahead.

Yes, good evening. Thank you for letting me on. Congrats to the results. In regards to your performance being slightly ahead of your expectations in EBITDA growth driven by the cost containment program, should we expect that you basically start to spend a little bit more in Q4 or is this a little bit to just offset now the second lockdown? That's the first question. And then The second one is on the SIA business. Do you expect them to report also a similar Q4, which would then potentially drive them to EBITDA growth for the full year? And then the last one is just looking for your 2021 performance. Do you expect that this continues now? What is roughly the growth rate of the core business of NEXE you would expect next year?

Thank you, Anais, for the three questions. Let me try to answer them in order. Spending more on the last quarter. Honestly, we always try to spend exactly what is needed for the business, and therefore we continue to implement our cost plans. We will not spend things on things that are unnecessary just because we are ahead of the plan on the third quarter. And by the way, now we have in front of us no uncertainty on the volumes for the last quarter. So we keep running with our plans. Again, as we said in the past, whenever we see clear opportunities, I mean, our business is a growth business. And therefore, whenever we see opportunities for growth that require us to spend a bit of money, even if I'm planned in the short term, we just go for it. It would be wrong differently. Whenever I look at the quarter at the end of the at the end of the story. Obviously, for us, delivering consistently what we tell you is super important, super important, but despite that, we always keep a longer-term view on everything we do. CF fourth quarter results, honestly, it's a bit early for us to comment on a company that is an independent company, so honestly, we don't know. I think the results that were reported are very encouraging, and we should congratulate them for These results, I cannot really comment on what will happen for them in the fourth quarter. Clearly, these results are showing a good both resilience of the top line and important work being done on the cost side as well. On your last question around 2021 performance, honestly, I mean, obviously, we are preparing our budgets. We already have our budget ready for next year, but now we start doing simulations on the back of the COVID situation. I think, again, it will be affected by clearly how longer the potential COVID situation will be. The news we all received on vaccination readiness are obviously very encouraging, but I think it's really too early to talk about next year. Obviously, also on the back of that performance this year, unless the situation on COVID continues for a long time in the year, we expect that year to be a growth year. That's definitely what we are working on. That's definitely what is in our plans, but it's clearly too early to talk about more precise indications.

Very clear. Thank you.

The next question is from James Goodman with Barclays.

Please go ahead.

Good evening. Thank you. I'll hold back questions on that as you ask. But one thing I think I'm allowed to just ask you is whether we should infer anything at all just from the extension to the negotiation period. I mean, you've already announced preliminary terms. I just want to ask you really whether There's a negotiation ongoing around any aspects of the deal or whether we're really just talking about, you know, the progression of the sort of legal aspects of the transaction. Then a couple of quick ones on the on the quarter, please. And the first one just on the like for like performance back to growth was very encouraging. Presumably Intesa was supportive to that. Just wondering if you can give us the organic NEXE performance excluding Intessarizer for the merchant services business or the overall. And finally, appreciate that there's a lot of uncertainty in terms of the volume and top line development into 21. Can you help us at all with the budgeting around the OPEX into 21? It's hard to know how much of the cost containment plan on OPEX comes back next year. and to reconcile that with the ongoing cost containment within NEXE. So anything you can say on scenarios around OPEX and 21 would be helpful.

Thank you. I let Bernardo cover the second and the third. Let me briefly comment on your first point. The fact that we are extending the exclusivity period by a few days, I believe, means two things. Number one is that we are progressing and we are very keen to make it happen on both sides. And second, that there is still a few things that need to be finalized before being able, hopefully, to close the deal. Bernardo?

Hi, James. On Intesa contribution, Intesa contribution is obviously positive. It's a great book, great quality book we bought, and therefore it helped stimulate growth during the whole course of the year. With regards to the protection mechanism I was referring to earlier, this didn't really kick in in the third quarter. It was more common related to the full nine months where obviously in the lockdown months in the spring, this actually helped. So with regards to OPEX for 2021, and by the way, going back to Hannes' point earlier, obviously we're going to deliver the 100 million protection of our P&L and cash flow during the course of the year. which doesn't mean the costs in the fourth quarter this year are not going to be higher than the third quarter and the costs in the third quarter are higher than the second quarter and so on and so forth. It's a growing business. Every quarter we have higher revenues and higher costs. But ultimately, if you look at it on a year-on-year basis, that's where you get the savings, just to be perfectly clear. With regards to next year, I think we've discussed this a number of times before. Most of these costs that we are cutting this year are going to come back next year. A lot of them are related to our discretionary and related to activities that we chose not to carry out because the market was not conducive to them. Some of them were automatic reductions tied to lower performance. So if I think of Paolo and the Exco, we're not going to be receiving variable compensation this year because we're going to miss our budgeted target for EBITDA. You know, we're paying less on processing costs as volumes have come down. All of these things, hopefully, at least with regards to variable compensation, will come back next year if we hit our budget target for next year. But a lot of them, I mean, some things will stay. I mean, travel, we're unlikely to spend as much as we used to on travel. But, you know, we had a virtual bank convention this year, which was cheaper than hosting a live event. But hopefully next year, If COVID has been dealt with, we will go back to spending that kind of money in marketing, etc. So most of these will come back. Now, we remain wedded to making sure that our costs never go back to where they were, thanks to the investment we're making in IT and internalizing certain costs which are outsourced. So even though year-on-year costs will rise again, hopefully volumes will rise much more than proportionally, and we'll still have costs which are below or around, I would say, the 2019 levels at most next year. Okay.

Thank you.

Thanks.

So let me just, before we take the next question, underline again the point around Intesa, while in the first and second quarter debt protection had a roll, now performance in the third quarter basically has zero rolls. So it's our... is not impacted by that protection, this means that also that component of the business has been growing organically well.

Yeah, that's great. Thank you.

The next question is from Mohamed Mouawalla with Goldman Sachs. Please go ahead.

Great. Thank you very much. Good evening, Paolo Bernardo. A couple of questions from my end. Firstly, just... on that sort of as you go into Q4 next year, obviously you're not sort of, can I just confirm that you said that even if we sort of exclude some of the guarantees you had on in terms of the underlying merchant business still grew positively. And then as we go into Q4, your visibility, I know that there are many moving parts here, but your kind of ambition would be to sort of deliver close to kind of positive growth in Q4. And then as we move into 2021, I mean, some of the regulatory or the government initiatives you talked about, Paolo, could potentially act as further tailwinds. So how should we think of kind of the shape of the growth and how much incremental growth could these initiatives add in terms of the kind of trendline growth that you expected that was going to be more high single digit in a normal year? It could obviously grow faster than that, but are these on top or are they built into some of your midterm projections?

Good evening, Mo, and thank you for the questions. Listen, on fourth quarter, it's difficult for me to add on what I said before, and this is a little bit independent on the dynamics around the merchant book of Intezit is actually performing very well. It really has to do with the evolution of the pandemic, and therefore it is impossible to speculate now what will happen in the fourth quarter. You've seen the volumes. You know that we are very resilient to volumes because half of our revenues, a bit more than half of our revenues, are more dependent on this toll base. The toll base dynamics are okay. And therefore, you should not expect major shifts. But it's difficult to say if the growth that we've seen in August 2021 And in September, we'll continue, given the environment out there. So I really cannot add a lot on projections for Q4. And I personally believe that a key element will be what will happen, obviously, in the Christmas season that is so important for all merchant categories and if and how those categories will be affected that by lockdowns in that period. The second, on your second question, listen, I think, I mean, the government initiatives, when they were conceived at the end of last year, they were more focused on promoting digital payments. My point of view is that, especially the cashback period, is now intended basically to promote consumption, to promote, to basically incentivize people to go and in-store and buy in-store to basically create momentum and support the relaunching of the economy. Obviously, there's a side effect that is the digital payments, and therefore this could have a positive impact there. As far as the outlook for next year is concerned, again, it will totally, depending on the first part of the year at least, on what will happen with COVID. But I think we have seen an underlying acceleration of digital payments. I think in the past we've commented that cutting through a lot of analysis, advanced analytics outcomes, and stuff like that. If you really want to cut a long story short, our perception is that this year probably the penetration of digital payments that normally would grow one to two percentage points is actually growing more or less 50 to 100% more than that. So kind of a twice speed underlying. So hopefully that will support a good year next year again if we put COVID aside. And then on the effect of the government initiatives, I think it will very, very much depend on the communication effort and the support that this communication will provide. We understand that the government is very committed to these initiatives, again, for the benefit that they expect not only the modernization of the country to have, but also the acceleration of, in general, consumption for the support of the economy and to the smaller merchants in particular. The impact will very much depend again on the effectiveness of this communication. Obviously, from our side, we're already ready to support these efforts in all possible manners, both on the consumer side and on the merchant side.

Okay, that's great. Thank you very much.

The next question is from Stefan Curie with Odoo.

Please go ahead.

Yes, hello. Good evening. I have two questions, if I may. Not on the quarter of my questions that have already been asked, but on the SIA deal, if you can share with us your thoughts after a few weeks of really looking inside the company, if you could. of, you know, there have been some questions in the market about the competition authorities with, you know, you're not going to be asked to do some effort if you have more visibility on the competitive issue of the addition of the two companies. That's the first question. And the second question, I know you said you don't want to talk about NET, but there is a recurring question that that we also have is about your ability to conduct two deals of such a size at the same time. So if you could just share with us your thoughts about how you're going to organize yourself to make it happen smoothly. Thank you very much.

Good evening, Stefan. So listen, ONCEA can only repeat what I said in the past. We've done as much homework as possible around the analysis on the antitrust aspects of this transaction. And the reason why we are moving ahead with this transaction is because we believe this is compatible with the rules. uh... obviously now uh... uh... immediately dvd we would have uh... uh... conversations and where it is that it's a conversation some in some ways that with the competition authorities uh... that remain at the ultimate judges of uh... all of this uh... and uh... and it's uh... impossible to have a about presider uh... early on understanding on that the outcomes here uh... i cannot repeat what i said in the past uh... uh... you need to look at the activities of the two companies in terms of vertical markets, not just in terms of payments in general. The markets that I think today the European competition authority is segmenting the payment space in are about 20. I'm not talking about geographical markets, I'm talking about vertical markets, about 20 already. And therefore you need to segment all these businesses. And then you need to look at the overlaps, the potential overlaps in each one of these. And the reality is that the majority of these markets are already defined or are becoming more and more pan-European. And when you get this granularity and understand that actually we have quite different roles in the value chain as more on the products, they're more on the platforms and processing, you realize that the picture is quite different. And this is the basis on which we have decided to move ahead and we believe this is compatible. On your second point around the ability to execute, I would really prefer to discuss this if and when we get there because I think that before having that conversation, it's really important to share with you where we see the synergies coming from, how we think we can address and face them, and so on and so forth. So I think it's important to have that conversation in the context of a much richer set of information made available to you.

Okay, great. Thank you very much.

The next question is from Alicia Metuku with BAML. Please go ahead.

Yeah, good afternoon, guys, or good evening, rather. Just three questions. Firstly, just on this 10% cashback measure that's being put in place by the government, it seems to me like this could be a pretty big deal and even a bigger deal than the economic reopening as we go into 2021. Firstly, would you agree with this point of view? And secondly, you said earlier that the impact of these measures would depend on communication but I really struggle to see why somebody wouldn't want to get 10% off their purchases. Are there any other reasons that we need to be aware of that could cause these measures to fail in driving adoption of digital payments as you look into 2021? That's my first question, and then I've got a couple of follow-ups.

Good evening, Adi. Well, listen, I agree with you that A 10% cashback is a no-brainer. That's the way I would simplify it. Then I think it's a little bit of a rule of marketing. I mean, people, in order to get it, they need to subscribe. They need to subscribe on an app or on the issue of digital properties. And therefore, there must be a voluntary action to do it. And marketing tells you that sometimes people don't pay too much attention to the messages they're receiving. And therefore, communication is key. So even things that seem to be totally obvious and no-brainer sometimes don't happen because people don't simply realize them, they don't know them, they're not aware of them, and they don't take action to make it happen. I think the size of the incentive is important. So that's the reason why I think that if people are aware, it's a complete no-brainer to participate. And because there is nothing to lose, there is only to gain. But again, I think communication is going to be important. That is why not only the government is, as far as we understand, planning to do important things in this space, but we will also try to help as much as possible.

Understood. And just a couple of follow-ups, just maybe one for Bernardo. When I look at the acceptance rates, I think you made a comment in one of the slides that the take rates are higher on Italian cards than they are on foreign cards. Could you shed some light on what sort of magnitude difference are we talking about? And then finally, just a question on NETS. I know you can't say much, but one of the misconceptions that seems to be in the market is that NETS is a low-growth company. And I just wondered if you're planning on presenting any financials on a performer basis with the sharing the historical growth with the current perimeter as you know the company you will be acquiring and any any thoughts around that would be helpful thank you Adi let me just take briefly the second one obviously yes obviously yes I think there are already information available on their website but obviously we will share with you our views and

Let me pass the floor to Bernardo.

So the difference is that clearly X-Ray 8 interchange is much higher than it is in Europe, where it's capped at 30 basis points on international schemes. And our merchant fees don't always reflect the full difference in the interchange fee, which is paid to a US issuer, for instance. The order of magnitude, therefore, can be several tens of basis points. It really depends for merchants, but it can be material. Obviously, I mean, the way it works is you charge the merchant fee to the merchant. If it's a U.S. issuer, you take off the interchange fee paid to the U.S. If it's a domestic issuer, you take off 30 basis points, and given that we're not issuers in the U.S., we lose that interchange fee. all in, so having a domestic transaction is better for us than having a foreign transaction. Unfortunately, the overall volume effect is overwhelming, and compared to this mix effect, it trumps it, so it's kind of silver lining. Lower volumes is bad, but within these lower volumes, the mix effect is positive.

Understood. Thank you.

The next question is from Sebastian Zappovic with Captain Chevreux. Please go ahead.

Hello, everyone, and thanks for taking the question. The Italian government seems to be looking to increase the contactless payment limit to around €50, if I'm right. Is it something that could give a clear boost to the child payment usage in Italy in the coming months? Regarding contactless, do you have any data points regarding the usage of contactless payment in Italy since the beginning of the year? It would be quite helpful. And also, on Q3, can you share with us the level of free cash flow generation that you recorded in Q3? And also, where do you see your capex ending in 2020 based on the cost containment plan that is ongoing? Thank you.

So I'll let Bernardo handle your second and third questions, reminding that normally we don't communicate progress on CapEx on the quarter, on first quarter and third quarter, but only on full year and a half year results. But I'm sure Bernardo can give you some indication, some high-level indication. Listen, on contactless, contactless is important. I think it's important. I think we realize it with our own experience. By the way, also mobile is important. And I think if anything... When we compare like-for-like customers, the frequency of usage for customers that migrate from mobile accelerates a lot as much as the ones that when you move from normal payments into contactless. Yes, the threshold for these transactions will be increased to 50 euros. This is under implementation already, so it will happen at some point early next year. Just as a reminder, it's already possible, obviously, to pay contactless above the current limits, but you are requested to sign. So the difference is that what will be increased is the limit under which you don't even need to sign. And clearly, this is a big simplification because at the end of the day, is somehow replicating the ease of use of mobile, where normally you don't sign because you use your fingerprint on your face as an identification. So we think it's a very positive move.

Bernardo? On cash flow, I think probably you've answered the question. I mean, we don't give the breakdown. You can just see that cash balances have gone up by $90 million. The cash equivalence is actually the fact that the Visa shares, as I mentioned earlier, but in terms of cash balances, we've increased the quarter by 90 million euros, but we will come with a full breakdown of the cash flow and the year numbers in February.

Okay, thank you. And the CAPEX budget for this year, do you believe you can end in 2020 for the CAPEX?

I think we hadn't given you the exact number, but it will be lower than what we budgeted because of the cash containment program. And I think we said we were going to spend approximately 40 million less than what we'd originally planned during the budget period at the end of last year. And the truth is we won't be spending 40 million less than what we had planned because, as I was mentioning earlier, we have reshuffled the overall composition of the 100 million, spending a bit more on CAPEX, so a bit more than the revised budget on CAPEX and a bit less on transformation and operating expenses.

Okay, thank you.

The next question is from Gianmarco Bonaccina with Equita.

Please go ahead, sir.

Yes, good evening. A couple of questions. The first one, clearly it's impossible to know what is going to happen with this COVID measure, but just for sensitivity, what kind of revenue decline do you think you can withstand in the fourth quarter, eventually if the COVID situation deteriorates to reach your ambition in terms of It is that considering the possibility you have on the cost saving plan. The second question is just a clarification on slide 1213 when you talk about the transaction and volume in the Q3 merchant and card. Why we have seen that in the merchant side there was decline of minus five and in card growth of plus four in the number of transaction and in the volume. Why there was this decline? Thank you.

While Bernardo tries to run the math on your question on the different scenarios, let me take your second one. It's basically because you lack the contribution of visitors in that case. So that's the key point. um i mean i mean i think the thing this way no if an american comes to italy if a french comes to italy you have the volume uh if they don't come you don't have the volume so in the summer for example half of the volumes were not there full stop no uh if an italian doesn't go to france uh first of all italy is made an inbound market net net is an inbound uh market but said that An Italian that is not going to the U.S. for his holidays is staying in Italy and is spending in Italy. That's the key point. And therefore, you still have those volumes. And therefore, volume-wise, the impact is normally softer than what you have on acquiring. Although revenue-wise, instead, you have some impact because normally when an Italian or in any case your national customers spend abroad,

normally the revenues that you make per transaction are higher for a number of reasons that you understand perfectly so that's the dynamic that applies so on the on the fourth quarter i mean you know first we need to go back to first principles let's say a bit like we did back in during the lockdown months and remind us that we have approximately or if you believe our our guidance and you look at consensus we would probably hit between 1 billion and 1.1 billion of revenues for 2020. And this means approximately 90 million euros per month of revenues if we don't weight them for seasonality. And half of our revenues are roughly half of our revenues are volume driven. So that means at risk we have 45 million euros. So in the lockdown months, and we saw there's pretty simple math to be run in terms of the closures and impact on volumes. And when we lost half of the volumes, like in April, we lost half of the variable revenues, so approximately 20 million euros or so. Now, what does that mean? That, you know, depending on, and this is where it's harder to run the math, depending on what you expect for the fourth quarter in terms of lockdown, which is different, very different to what we experienced in the spring months with the lockdown then because of all the things Paolo was mentioning earlier. We don't expect the severity of the lockdown to be translated into such a steep decline in revenue. So I wouldn't be expecting to lose, for instance, 60 million euros of revenues, which is 20 million per month for three months. I would expect to lose significantly less than that. And if that stands to reason, then I think we stand by our guidance and we shouldn't miss the target. Also because if you then step down to the EBITDA, level we do have the ability to well we have a for starters an automatic buffer which comes from the variable compensation which may well be paid to some people other than the xco who might have received a variable compensation depending on on whether we hit the forecast And then we have other variable components of cost, where the trend I was mentioning earlier of spending a bit more on certain things because it made sense to do so, we could revert them to protect the EBITDA and the target we've given ourselves to be flat or slightly high year on year. So, sorry, I can't give you an exact answer because it really depends on... No, it's very useful.

It's what I want, just to be kind of sensitive. Thanks. Thanks a lot.

The next question is from Paul Crash with Jefferies. Please go ahead, sir.

Hi, good evening, everyone. So I have three questions on my end. I guess maybe starting with the merchant services business, could you maybe provide more color on the split between organic take rate accretion in the period due to mix, I guess, versus maybe higher POS installations that should drive your install-based revenues? And, you know, if you could then maybe comment on how we should think about that in the fourth quarter. The second question that I have then really relates more to the cards and digital payments business. Now, if I assumed that the install-based revenues grew during the period, it would suggest that your volume-based revenues actually fell in the high single digits in that business. I mean, could you maybe quantify then what are the various buckets, you know, that kind of led to that high single-digit decline in And again, maybe how should we think about that going into the fourth quarter in terms of just our estimates? And then finally, I think on the acquiring insourcing side, could you maybe comment on maybe any progress on that initiative? And I guess since obviously the CNXC deal is a vertical merger, is there any risk around some of your insourcing projects where maybe the trust regulator might ask you to either halt some of those things or that they might affect maybe your ability to insource these things going forward.

Listen, let me take the third one while Bernardo thinks on how to handle your first two questions, and maybe we will have to come back to you maybe with some more insight to help you run through that logic. Well, I mean, our acquiring platform has been developed. It's already up and running. We're in trial phase with a few customers. And therefore, the project is progressing as expected. And honestly, we've already run in-source volumes on the back of Intesa. And therefore, we don't see any major impact there actually this platform is very advanced and we believe will be over time the group platform given its characteristics and its efficiency. Bernardo?

Yes, so a bit of a complicated question you have there, Paul. I think what I would say is the accretion to the take rate in the third quarter, as I was mentioning earlier, was due to those effects which we discussed. One, of there being a greater proportion of domestic card transactions in Italy rather than in the prior year when we had, particularly during the summer months, a higher proportion of extra EA cards transacting. Now, the big difference is in the summer months compared to the fourth quarter where this effect is much smaller, the proportion of of extra EA cards transacting in Italy in the fourth quarter in a year is much lower than it is in the third quarter. So that effect will be less beneficial in the fourth quarter. The other effect which will be less beneficial in the fourth quarter than the third quarter is the increase on a four-quarter basis of SMEs transactions. So as we came out of lockdown, the larger chains kept on transacting during lockdown And SME smaller merchants started to transact only after the release of the lockdown provisions. Now, this helped performance on a quarter-on-quarter basis, so second quarter compared to third quarter. And this, again, will be lost on the fourth quarter if you look at it compared to the third quarter. So the mixed effect will substantially be much lower in the fourth quarter than we've had in the third quarter. With regards to installations, I don't know what numbers you're running, but saying that installations were higher than we had planned. Clearly, now they're slowing down again because of the restrictions are moving between regions. So this, again, will impact revenue growth. Not so much, I would say, on the mix front. And that's where I was a little confused with regards to how you were thinking of this and what you wanted to hear from us. But I don't know, maybe I suggest if you want to send us in more detailed questions and then we can follow up later with greater detail.

No, that's fine. I'll follow up later on. Thank you.

Okay.

The next question is from Alexandre Ford with Exxon BNP Paribas.

Hi, good evening. Thanks for letting me on.

I just wanted to go back again for a minute on the cashback incentives in Italy. Paolo, you mentioned that it was an opt-in mechanism that consumers would need to take it up at some point. So I was just wondering who you think would be the channel to market the distribution for this offer. Is it going to be card issuers? Is it going to be merchants? Who's going to push that to consumers? And then relating to that, I was just wondering if the Italian government has put in place some mechanisms to make sure that this cashback money goes to people who are new to electronic payment and perhaps not to Nexus top executives who already use their cards every day. Thank you very much.

So, Alexandra, let me take these two ones on the go-to-market, as you called it. Well, the process is quite simple in the sense that there are basically two ways for the customers to activate the promotion. In fact, it's a promotion. I would call it that way if it was from a company. And you can do it either on a dedicated app that has been developed by the government, and it's an app where the government is also trying to bring a number of interactions with the public administration. I think the app is called EO. And second, you can also activate it on the website or the app of the issuer. offer your cabin specific is also far off uh... of maxi the banks in their own banking and so on so forth and i think this is important because then you will have a somehow the double effort from asked the bank and also from the not that the government to promote these uh... uh... these uh... these are channels uh... to activate them uh... the product on your point uh... around uh... the uh... the uh... the uh... i mean what type of limit that they're putting in order to make sure. I mean, I have a lot of sympathy for the point you're making, and I basically made the same example you're making to the people that were designing these mechanisms. I clearly said, listen, people like myself, you don't need to have a further incentive to use digital, and therefore any cashback that came to me doesn't really create... any further elasticity of behaviors, then this is an important rule of marketing as well. However, there is a very important point. The key point is that mechanics also have to be simple for people to join. And this is true for any promotion in any sector, any industry, any country. And if you start putting too many limitations and too many segmentations and too many conditions, then people basically get lost and say, listen, this is not for me. This is not really going to be working there is something that is really not too tricky for me and that's the reason why because the only way to manage the point that you made was actually to put a threshold that was basically comparing which we also proposed at some point because we're sympathetic what you're saying that basically says I will give you cashbacks only on the extra amount of money that you're spending compared to the same period of last year This is super complicated to be managed for a system that is working on many, many different issuers, many, many different acquirers, and is also more complicated for communication purposes. So they did decide not to go in that direction. By the way, there is also another point you make, that is that certain merchant categories are, from this angle, more useful to be incentivized for many good reasons. But again, it was too complex. And therefore, they went for something very simple, that is, there is a protection mechanism that says, listen, in any case, There is a cap, and you will not get more than 150 euros back. Overall, there is a cap for the overall spending in the period of 1,500 euros. And therefore, let's say the leakage of these benefits to these super users like ourselves, and I think the vast majority of the people in this call, not just us, ourselves, that leakage will be in any case limited and therefore the majority of the value will go to the people that are really coming in and changing behavior.

I see. That makes lots of sense. Thanks very much for the detailed answer here. Thank you.

The next question is from Marco Bandona with Credit Agricole. Please go ahead, sir.

Hi, just a quick question regarding your debt levels. I was wondering maybe just the transaction, if there will be something like payment to debt, so you might need refinancing or something, if you can elaborate something more.

Sorry, could you repeat the question?

I didn't quite understand it, apologies.

Yeah, sorry. I was just wondering regarding your debt levels and your debt maturities. Because of the transaction with Fiat, there is maybe something like a change of control, something which requires refinancing of your debt, maybe if you can elaborate more on this.

Sure. The covenants within our debt structure would cater for the SIA merger without a change of control being triggered. SIA, on the other hand, has a terminal facility which would require to be refinanced. It's something that is being built into, let's say, the work we're doing now with SIA in order to make sure that we hit our timeline.

Thank you.

Gentlemen, there are no more questions registered at this time.

So well, thank you for attending this call so late in the day and thank you for your questions as usual. Come back to us for any further questions. Again, the key messages for today are quite simple. Good performance, strong performance in the quarter ahead of our plans and good learnings from phase one of COVID as we walk into phase two. Rapid recovery is possible, especially in certain sectors. And second, shift to digital payments is happening faster than usual. With that, again, I wish all of you a good evening, and hopefully we will talk quite soon again. Bye-bye. Have a good evening.

Bye-bye.