Nexi Spa Azioni Ordinarie

Good afternoon. This is the Coruscall Conference Operator. Welcome and thank you for joining the NEXI First Quarter 2021 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, 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. Paolo Bertoluzzo, CEO of Nexi. Please go ahead, sir.

Thank you, and good morning to everyone, or actually good afternoon to everyone, and good morning if you're connected from the U.S. Welcome to our first quarter result call. As usual, I'm here together with Bernardo Mingroi, our CFO, Stefania Mantegazza, our head of investor relations, and a few other members of our team. As we've done last time, we will give you today an update on how we see the market evolving in the COVID context, and particularly the focus on volume dynamics and volume evolution. Then we'll move on our results for the quarter. And last but not least, we'll give you a quick brief update on our M&A progress as well. And as usual, we will have plenty of time for Q&A. Before I move into the presentation, let me just make two technical notes. The first one is that it's really important to remind ourselves that when we look at our results for the first quarter, we have to keep in mind two things. The first one is that in 2020, January and February were actually very strong non-COVID months. Well, actually, March was already a very tough month for Italy because, as you remember, the first wave of COVID started from Italy in the Western world. The second element is that Honestly, different from our expectation, we had a third wave coming into the third quarter and the latter part of the first quarter, therefore, after March and somehow also the beginning of April. The second technical note is that given the fact that 2020 has been an year with very extraordinary effects due to COVID starting from late February, and therefore any comparison from 2021 volumes or performance to 2020 is really difficult to be understood. We will be using as much as possible also comparison to 2019 numbers to try and give you as a benchmark a more stable non-COVID affected situation. Obviously, we're doing this to try and help all of us to understand what is really happening in the business. For completeness, we also have put in the attachments the more if you like normal year-on-year comparisons benchmarking 2021 volumes with 2020. So that's in case you need to compare it with other players in our space, you can do that as well. But we really prefer to help you as much as possible with comparable numbers. So let me just, let me now move into the presentation and actually let me start from page three where we start to summarize the three key messages for today from Nexi. The first message is that After the third wave of COVID that was unexpected, from mid-late April, we've seen a fairly clear and strong volume acceleration. We've seen it a little bit across the different categories. In particular, in the basic consumption sector, which includes groceries, pharmacies, utilities, these type of things, we have seen a continued strong growth that is simply a continuation of what we have seen also throughout the previous periods, confirming a clear acceleration of the transition from cash to digital in Italy. Second, in the discretionary consumption sector, as shops were broadly reopened recently, Towards the end of April, we have seen a very, very rapid re-acceleration, and they're now into a strong positive. And last but not least, we're starting to see some visible signals of initial recovery also in the more travel and ratio-related sectors on the back of some partial reopenings that have happened over the last two or three weeks. So all in clear recent volume acceleration from late April. Second, our performance in the quarter, in the first quarter, despite the third wave of COVID that was not expected, has been actually ahead of our expectations. Our revenues grew 4%. Our EBITDA grew 2%. It's always important, as I said before, to compare this with 2019 to basically clean it up from extraordinary 2020 effects, both on revenues and on cost. If you do that, our revenues are actually up 5.3% versus first quarter 2019, and actually 9.2% versus first quarter of 2019 in terms of EBITDA. And therefore, when you compare the 9.2% of EBITDA with the 5.3% of revenue growth, you see the continued effect of our operating leverage and margin expansion. The combination of these two elements is suggesting us to basically raise the ambition for the full year from the mid-high single digit that we presented to the market in February to what we're calling high single digit, two double digit revenue growth. And obviously, I will come back to this in the end and I'll try to give you more clarity around what we mean with that. But clearly, we have a more positive view of the rest of the year on the back of the results, which we've seen in the first quarter, despite the third wave of COVID and on the back of the recent volume dynamics and plans for the openings and vaccination as well. Third trimester for the day, we also are continuing to progress in the creation of the European Paytech Leader. As you've seen yesterday, Nets and SIA have communicated their high-level standalone performances, and they are both of them strong and ahead of our expectations. We confirmed, basically, the plan for closing as it was anticipated. Therefore, we confirmed that we plan to close Nets' merger by the second quarter this year, and we expect the next ESEA closing to happen in the third quarter towards the latter part of the third quarter, 21. And obviously, as we're working on the closing, we already started to work across the board with our future colleagues on the go-live initiatives, so therefore the preparation for the one, and the transformation and synergy initiatives as well. Not only this, today we are also announcing, I would say strategically important, a bolt on M&A. It was anticipated in the recent months. We have extended our partnership with Intesa Sao Paulo to the former UBI book, or better to the portion of the former UBI book that was bought by Intesa. This is very consistent with what we said in the past, that while we are busy in the combination of NEXI, NETS, and SIA, and in the creation of value on top of these combinations, we are also continuing to explore both on M&A opportunities where they are very clear, very clearly value-adding, and also quite simple to be managed and integrated. So this is the summary for the day. Now let me skip the summary pages four and five. We put them in for completeness as we've done in the past, but let me move into the content and let me start with the volume dynamics. I will then hand over to Bernardo to call the results and we'll come back on M&A and ambition in the end. Now let's move on page six. And before we start looking at the numbers together, let me just give you a sense of what has happened over the last few weeks in Italy to be able to put everything into that context as well. As I said before, in March, we had this unexpected third wave of COVID. So we had hard lockdowns at Christmas, you remember, then some reopenings in January and February, but then also in Italy with the third wave of COVID. of COVID happening in March, and that has obliged the government to take new restrictive measures. And the new lockdowns came into place. You may remember that since some time ago, we have a color system for the different regions of Italy, red, orange, and yellow. And the point is that many, many important regions moved from yellow to orange, from orange to red in that period. These measures, together with other elements, add positive effect on the dynamics of the pandemic. And over the last few weeks, we have seen an improvement of the situation. We now, depending on the day, are moving around 5,000 to 10,000 new cases per day with a percentage on the tests that are done that is now well below 5%, depending on the days, from 2% to 3%. The good news is that the pressure on hospitals, the pressure on intensive care is going down. Unfortunately, sadly, we still have 200,000 to 300,000 people dying per day, but as you know very well, this is the effect of the new cases back several weeks ago in most of the cases. In parallel, the vaccination plan has accelerated as well. Italy is probably broadly in line with the other continental Europe countries. It is probably a month to two months behind compared to the UK and the US, not to mention Israel. But this vaccination plan has now accelerated very, very visibly. We are now vaccinating more or less half a million people per day. We have about 30% of the adult population that got at least one shot of the vaccine so far, with about half of it already having two shots. Most importantly, the majority of people above 70 years old, about 80% of them already got the two shots. A lot of the people that are exposed for example, in hospitals and doctors and so on, got their vaccine done. A lot of the people with health fragilities and the people that take care of them also receive the vaccine. And just to mention a personal case, I'm 55, I will get my first shot in a couple of weeks, and the government is announcing further acceleration for the plan. So this is the context that we are in. As a consequence, the government over the last few weeks has decided that very carefully designed and rationally planned reopening plan, still using the color grading for the different regions and therefore the country has gone rapidly from red to orange and again from orange to yellow. As you speak, the government is deciding what will happen from next week and most of the regions will go into yellow. In parallel with this, we have foreseen the reopening of the majority of retail with limitations. For example, large commercial centers are still closed during the weekend. The good news is that also restaurants and bars are now open until 10 o'clock in the evening in the outdoor facilities. So indoor cannot be used, but at least outdoor can. is there. Fortunately, the weather has not been too helpful in Italy over the last couple of weeks, but in any case, it's shocking to see people almost eating a pizza almost in the rain. It tells you a lot about how people are really keen and willing to start to come back to normal life. And we still have a curfew at 10 o'clock in the evening. But as you can understand, the situation is already very different from what it was in March. So this is the context we're in. Now let's look at the numbers. I think the numbers are fairly self-explanatory here. As usual, this curve represents the year-on-year volume changes that we see as a combination of total issuing and acquiring volumes. Here you see on the graph the three different waves in red boxes. And as I said before, from basically the latter part of February, we've started to measure growth performance, not on a year-on-year basis, but actually comparing it to 2019 to make sure that you can really follow what is happening underneath. So what have we seen in the quarter? As I said before, we had a difficult start in January because of the lockdown. Then we had a recovery in January and February, almost getting closer to parity with the previous year. Then we had the new lockdowns happening in March. Easter was complete lockdown, therefore was obviously a negative impact, very negative impact. And then after Easter, instead, with the new reopenings, we're seeing again a strong acceleration happening. And if you look at the recent 5% or 9% data, This is really the best we've seen for a long, long time. The minus 11 on that week is justified by the comparison with what was happening two years ago. because of a long weekend with tourism and everything else that obviously this year has not happened. Just as a reference, and you will see all the details in the attachments, if you compare these numbers with last year numbers, March would have been a plus 36%, April would be a plus 63%, but again, as I said before, we really don't think these numbers are too helpful. They look so great, but they're not really helpful in understanding exactly what is happening. Now let's move as usual in the details of these numbers and let's start diving into the usual distinction between Italian cars and international tourist cars and therefore the inbound traffic to Italy. Obviously here we take only the view of acquiring where we have the data necessary to look at these dynamics and here you see What I was saying before, even in a stronger way, you see Italian cars went back into positive. Last week, they were actually growing at around 20%. Despite the fact, as I said before, we still have a lot of limitations in retail, leisure, entertainment, curfews, and stuff like that. But you clearly see an accelerated recovery here. At the same time, the inbound international tourism is still suffering a lot. I don't know if this marginal improvement that we see on the last week is already a signal of recovery, but clearly the situation there is still different. I'm sure we all read the press and what every single country is doing to reaccelerate and reopening the borders to tourism, but this is something that still has to become a reality. Now, moving to the next page, we give you, as usual, the details by macro category. Let's start with the basic consumption category. The basic consumption category has always remained in the positive space throughout 2020, throughout COVID, and also throughout the recent months. It's now running at around 40% over the two years. So this, again, is also a comparison to 2019. And as you clearly see, this is a strong acceleration, showcasing that underneath 2020, The different dynamics, we have a clear acceleration of the shift from cash to digital payments. Moving to the second area, what we call generic and discretionary consumption. Here we have sectors such as clothing, household products, beauty, these type of things. Over the last week, we see a stronger rebound. It went back into positive 6% growth with actually Italian cars being at plus 21%. Obviously, the individual weak data point per se cannot be extrapolated, but the trend underneath is very clear and already fairly solid. Last but not least, the high impact consumption here, putting basically all the tourism and leisure-related sectors, bars, restaurants, cafes, discos, hotels, transportation, airlines, and so on and so forth in here as well in the last week you see a nice improvement even if it is still at minus 30% with the Italian customers the Italian cards being already at a minus 10% so all in plus 20% e-commerce is also in positive theory all in, but you see very clearly dynamic is growing very strongly around 60-70% over the two-year period in the basic consumption, generic and discretionary consumption sectors, while is still fairly depressed in the travel-related sectors as well as everywhere else in the world, even if also here we see a nice improvement in the very recent period. Page 9 gives you a little bit of a visual demonstration of what I was saying. Here you see the continued growth of the basic consumption categories with weekly, if you like, ups and downs depending on the extraordinary situation of the week, but quite solid, very high growth. You see over the last few weeks the super strong reacceleration of the discretionary consumption from minus 40, minus 44% to actually a positive space, plus 6% in the last week. And here you also see graphically some recovery happening literally over the last few days here. when it comes to the high-impact consumption sectors, and here we decided to basically give you some more granularity on some relevant sectors. Over the last four weeks, restaurants and bars have improved almost 50 percentage points, travel and transportation around 20 percentage points, also hotels in the last week about 10 percentage points. They're all still in the negative space, but the speed of is, we believe, very, very visible and I think good for the economy more in general. Page 10, so these are the dynamics that we've been observing. Page 10 is basically an update of the similar page we had last time. As usual, we try to pull out data points that showcase the acceleration of the migration from cash to digital. On the left, you see the dynamic of the grocery category for Italian cards. It has been growing basically last year around 20%. Third quarter of this year, it's been growing about 40%, and this is actually compared to 2019, and therefore basically it's maintaining its kind of 20% a year growth rate, similarly in April, similarly last week, so quite consistent dynamic. On the right, on the top right, we also give you again the performance of volumes in the different categories of zones, red, orange, and yellow for Italian cards. And here you see basically that when reopenings happen, therefore, when you go from red to to orange, and from orange to yellow, basically you have an improvement that goes anywhere around 10%. In this particular observation, we had from red to yellow about 14 percentage points, and from orange to yellow about 9 percentage points. And actually, now the dynamic is even clearer when you carve out from this data the high-impact consumption sectors where you see that actually the orange zones and the yellow zones are actually running at 20%, 30%. over the two years in terms of growth rate. Let me stop here in terms of all the dynamics. Let me hand over to Bernardo who will cover results. Bernardo.

So good afternoon from me as well. Starting on page 12, we'll see how the steady increase we've observed in volumes in the first quarter translates into financials. Looking at the consolidated level, so the group, the next group level, we have revenues which are increasing by 4% in the quarter. It's important to benchmark ourselves against 2019 on top of 2020, as Paul was mentioning earlier, because of the strange nature of 2020 as a comp and the performance in the first two months of last year being very strong pre-COVID and then March being affected by COVID. So we have 4% growth in revenue on a year-on-year basis. And if we look back to the first quarter of 2019, so we have a 5% growth. Now, this comparison is even more meaningful against 2019 when we look at EBITDA because we have growth in EBITDA in the first quarter this year, 2% growth at €140 million compared to €137 million last year, which per se is a good result. I'd say it's ahead of our own expectations and something we're particularly pleased with. But it's important to benchmark ourselves against first quarter 2019 to have a more like-for-like comparison, given what happened in terms of costs last year. And we discussed this with a lot of you during the course of meetings after the full year results, etc. Obviously, last year, we took out a bunch of cash costs to protect our P&L and our cash flow. Most of these spring back in the first quarter this year. So it's useful to compare both EBITDA and then the cost later on against performance in 2019. You can see that EBITDA has grown by 9% compared to the first quarter of 2019. And therefore, we highlight the continued operating leverage our business benefits from, you know, growth in revenues 5%, growth in EBITDA almost twice that. And again, also from a margin perspective, you can see the margin expansion of two percentage points from 52% to 54% when we account for this extended time horizon to normalize for the anomalies of 2020. Moving on to, so this sets the scene in terms of the overall performance, growth in revenues, growth in EBITDA. If we look at merchant services on slide 13, We have flat revenues, 0.0% and flat revenues of 128.3 million euros. If we look at the comparison against 2019, it's 2.6% growth. More importantly, I would highlight the growth in volumes, in particular in terms of managed transactions. This is an important sign of Italians' propensity to use digital technology. payments or card-based payments compared to cash, further strengthening our conviction of the secular shift of cash-to-card payments as the average ticket drops and the number of transactions increases, notwithstanding COVID, double-digit, 10.2%. And in terms of value of managed transactions, we have also positive growth on a year-on-year basis, notwithstanding the fact that we had two full pre-COVID months last year. From a business perspective, what is worth highlighting, we have summarized in boxes on the right. We have continued to support the growth of the efforts of our client base in terms of large merchants with our omnichannel solutions, which have been increasingly important in a year which was impacted by COVID and the ability to transact not in a physical way but online. The acceleration of our MPOS proposition to counter growing trends of competition in this space, which has been a very successful initiative. And e-commerce, which continues to grow very healthily. We have highlighted what the growth is, excluding the high-impact sectors, which are in e-commerce very important. You obviously have all the travel sector, which is primarily e-commerce. But if you take that out, which has been impacted by travel restrictions due to the pandemic, if you strip that out, The other sectors have grown by 30% on a year-on-year basis or 63% as we've highlighted when compared to the first quarter of 2019. In general, even including the high impact consumptions, e-commerce has actually grown year-on-year and unsurprisingly has performed better than the physical channel. Volume growth in e-commerce has been accompanied by growth in revenues in e-commerce which have helped the performance in the quarter. We highlight here how gateway activations have doubled compared to what they were in the first quarter of last year. We also focused a lot on implementing PSD2 and allowing our customers to deal with implications of strong customer authentication and we have successfully implemented all the regulatory requirements which should be introduced. Page 14 moves on to cards and digital payments. Even in this division, we have strong revenue performance, which has been supported by a growth in install base, which is very important to us. We've had both a growth in the number of cards and a growth in terms of the revenues driving install base, 8% on a year-on-year basis. And I remind you, this accounts for approximately 60% of our overall revenues. We have very strong signals coming from international debit, which you know is a key pillar of growth for us. It's one of the key pillars of our strategy identified a couple of years ago, and we can see that international debit is fueling part of this growth with an 8% increase in the value of managed transactions on a year-on-year basis, better than the market as a whole, so if you include domestic debit and international schemes. We continue to work with the domestic debit scheme to increase their digital capabilities. This is obviously very important in light of what I was saying earlier with regards to e-commerce growth. And two interesting data points we highlight here in terms of, again, the payment habits in Italy. We have C-list transactions which increase 15% year-on-year. 38% of transactions were carried out on a contactless basis. Prior to COVID, now we're at 43% in April. So increasing the usage of the contactless features. And we also have a growth in mobile payment transactions, which are up almost 60% on a year-on-year basis. All of this has been helped by the initiatives which were introduced by the government and we spoke of in the past and are still in place. And all of this has translated into growth in revenues of 7%. We highlight here that this growth has been flattered somewhat by certain project-specific revenues, so you know that a large domestic bank was acquired by Intesa during the course of last year, Ubi, and we worked with our customers in order for them to integrate these businesses into their own, and this generated some project-related revenues which were booked in the quarter. In any event, we would have had growth in the quarter, but we highlight that just for completeness' sake. Page 15, the third division in Nexi Digital Banking Solutions has also had very healthy growth in the first quarter, up 13%. I would say that the benefit of this growth comes from pretty much all the legs of the business. ATMs have contributed to this growth thanks to the fact that we've completed the rollout of our new platform to all our existing customers, and we can see growth in installation of advanced ATMs as they replace the more traditional cash-in, cash-out ATMs. Digital corporate banking is also growing inertially at 3%. Corporate payments in general is an opportunity for further growth as we extend our pay-by-account solutions to new electronic money institutions which are coming into the market. And on open banking, we continue to work with the CBI Consortium in the open banking gateway which we have provided to them. In this division, we also had some benefit coming from project-related revenues which helped support this group. Coming to costs on slide 16, we like to highlight how we continue to remain very focused on controlling our costs as we showed, I would say, every year we try and show an improvement in our costs as we limit the growth or actually cut costs in the face of increasing volumes. This continues to be true today. If we look at 2019, again, to try and normalize for the factors which I highlighted earlier in terms of the evolution of costs in 2020 due to COVID, we have costs which are substantially flat compared to the first quarter of 2019. If you actually look at operating costs, they're down in line with the fact that volumes are not yet where they were on an aggregate basis. So costs are consistent with the evolution of volumes if you look at them against 2019. On the HR front, we have evolved our human capital base over time and this reflects the growth since the pre-IPO days till today. We then come to performance compared to 2020. We have an increase of 6.5% to €119 million. But as I was saying, this increase is explained by the fact that last year we had certain cost containment initiatives, €100 million in total, A lot of this flowed through our P&L. This year, a lot of these costs spring back. If I think of HR costs we've highlighted here, the personal cost basis we have started to accrue again for the variable component of compensation in our first quarter numbers. But there are also project-related costs tied to the initiatives I was mentioning earlier in the revenues front. So on a like-for-like comparison, costs are actually down almost one percentage point again highlighting our steadfast commitment to containing cost growth or actually trying to reduce it over time as we insource. Slide 17 comes to our net financial indebtedness. As you can see, we have brought this down from 3.5 times leverage at the end of last year to 3.2 times. This is consistent with our target of reaching the medium term 2 to 2.5 times leverage which we expect to be at the end of next year, and I'd say this is a good step in that direction. Page 18, I think, is worth noting in light of the 3.1 billion euros of securities which were issued in the first four months of the year. This was all done in light of the two M&A transactions with NETS and SIA, so we have, let's say, pre-funded the repayment of the NETS and SIA debt, which we will repay once the two transactions closed. In fact, if you go back to slide 17, you'll see the gross indebtedness has increased and the gross cash has increased for the proceeds of the convertible bond, which will be deployed to repay the debt and nets once that transaction closes. But these two transactions, the convertible bond and the senior unsecured notes, which are issued in April, basically helped us achieve a more balanced mix in terms of debt structure. Half of this is senior unsecured unsecured notes and the other half is equally split between term loans and convertible notes. Term loans affording us a certain degree of flexibility in terms of optimizing the cost of debt going forward. Notwithstanding what I just said, we have already achieved a very substantial reduction in the weighted average cost of our debt for down from 2.1% before these transactions to 1.6% now. This essentially achieves the targets we had set ourselves in terms of improving our cash EPS as we had disclosed them at the end of last year with the NETs and the SEER transactions. But we believe there's more optimization embedded in our ability to refinance, as I was saying, the term loan at better rates. And we also have spread our maturities over a number of years, starting from 2024 to 2029, basically getting rid of a lot of the point-in-time refinancing risks we had earlier. So from now until 2024, we can focus on optimizing the cost of debt rather than having to raise new capital, which is a good place to be. And the three rating agencies are supportive. They are on a positive outlook, and we hope that they will resolve this favorably for us in not too long a time frame. Having said this, I'll pass the floor on to Paolo to update us on M&A and his final considerations.

Thank you, Bernardo. So, all in, we've seen a set of strong results ahead of definitely our expectations and I think broader expectations as well. Now, let me move into M&A. First of all, let me give you a little bit more details on the acquisition of the former Ubi merchant book activity that had been bought by Intesa San Paolo a few months back. This is something that was already expected and planned into the agreement that we did have with Intesa when we signed the Intesa deal. It was already agreed that any potential M&A from Intesa would have been following basically the same logic and principles of the initial acquisition. On this page on the right, you see the key data points here. We're talking about 50,000 merchants. Here, the mix is quite similar to the average Italian mix, about two-thirds SMEs, one-third larger merchants, 6 billion euros of transaction volumes. And in 2021, this book should deliver about 17 million euros net sales. of revenues, net of distribution costs, because we're paying attention to the distribution costs, management costs above these 17 million euros, and should generate about 16 million euros. Most of the costs of this book are already into our numbers, because we're already processing this book from the past. And therefore, the net additional contribution costs to our numbers in 2021 should be about 17 and 16 million euros. I need to be very clear here. The economics of this deal will be recognized to NEXI from the beginning of 2021. So the cash flows, the revenues, the EBITDA will come into our numbers, but we will include it into our numbers only after closing, a closing that we expect to happen in the second half of the year. Therefore, these additional 16, 17 million euros are not in the numbers that Bernardo has just explained and are not included into the ambition that I will cover in a few moments. We will do it only after we close, as we always do to make sure that we can provide the market with the best possible and cleanest possible view of our organic performance, this in a separate way from what the contribution from M&A is. On the left of this page, you find a few more details. We're paying for this asset about 170 million euros plus earn-out, which follows the same possible earn-out in 2020 that will follow the same dynamics agreed with INPESA in the past. we have the contractual protection mechanism, for example, on risk of credit exactly in line with what we had in the larger intensity. So this is literally a kind of an add-on to that deal. But we're very happy to be able to sign this and to move fast toward the closing of it. Moving to the next page, a quick update instead on the other larger front of the combinations with NETS and SIA. Let's start with NETS. NETS published last night their results for the quarter. We have to keep in mind if we benchmark these numbers with, for example, our numbers that in their geographies where NETS is present, the dynamic of COVID has been a little bit the other way around compared to what has happened in Italy because in their geographies, for example, Germany or the Nordics, COVID has been light last year, it arrived later, while lockdowns and containment measures have been harder this year, and therefore there is an impact there. Nevertheless, the net has been performing better than our expectations at minus 3% year-over-year underlying revenues, with a super strong performance on e-commerce and about minus 10% As far as closing is concerned, EGM approved the merger in early March. We have received the antitrust clearance already in early March as well. We just have two or three remaining regulatory approvals to be obtained that we expect to come over the next very few days or weeks. We confirmed the closing in the second quarter of this year. Hopefully, at the end of May, if it's not the end of May, it will happen. We will be able to do the closing program a few days later than that, and therefore, we probably postpone the closing to the end of June, and therefore, in Q2, nevertheless. As far as transformation plan and preparation is concerned, I would simply say that there is a machine that is working, and there is a huge collaboration across people across the teams, and I would say that everything's on track. Synergies are being confirmed, and the plans are prepared to go into the execution right after closing. Stia has had strong performance, 9% revenue growth, and about similarly 8.6% for EBITDA. It's a combination of the effects of new customers abroad. and in Italy as well, as well as a good contribution from volume acceleration, especially in some of their customers. I don't forget that to see a business model, the element that is more relevant is the number of transactions rather than the value of transactions. And as you've seen in the lab explanation, the number of transactions is already accelerating a lot. As far as the closing agenda is concerned, we did file yesterday for antitrust approval to the Italian authority, as we were expecting, and it was also confirmed by the European Competition Authority. We obviously are progressing also on the other regulatory approvals, and currently we plan and expect to close by the end of the third quarter. Again, also here, the transformation program is ongoing. Obviously, we are given the different timeline of moving in a different phased approach, but everything is progressing as expected. Now, let me move to the next page. Let me talk about our ambition for the full year, that in a nutshell, we are raising in terms of revenue growth from mid-high single-digit to high single-digit growth to double digits. First of all, let me be explicit on what are the key assumptions that we are making here. Obviously, we're assuming that hopefully the COVID situation will continue to improve and we'll have no more waves happening. We are assuming that the reopening that we have seen happening over the last few weeks will continue. The government is discussing as we speak the next steps. And with high probability over the next very few weeks, you will see more reopenings. For example, commercial centers are supposed to reopen in the weekends. Bars and restaurants are supposed to be able to serve their customers also indoor and not only outdoor. The curfew, and there is an interesting debate in Italy on the topic, I think as in other countries as well, should be relaxed or remove the timing as to be decided by the government. And the government is also putting in place specific measures to support tourism and attract customers and foreign customers in particular to beautiful Italy. So all this is happening. Basically, the government is announcing new measures by the week, observing the evolution of the pandemic. At the same time, we are assuming that the vaccination plan will continue in line with the announced plan that actually should see about 80% of Italians being vaccinated with two shots by September. And this is pretty much in line with what we see today. Just again, as an example, yesterday it was announced that in Lombardy, 40 years of people will be able to be vaccinated in the coming weeks. So this is the underlying assumptions. Based on these assumptions, obviously, based on the results we've seen in the first quarter and the volume dynamics, we feel comfortable to raise, as I said before, our ambition from mid-high single-digit revenue growth to high single-digit to double-digit revenue growth. Let me be explicit with what we mean here. You may remember in February when we said that we were still seeing a broad range of outcomes given the uncertainty of the evolution with COVID. We believe that uncertainty is potentially still there and therefore we continue to see a broad set of outcomes. However, if you like, the range that we see is now upgraded up. Now we see as a midpoint to this range about 10%. So we don't want to give a precise number here, but the way you should think about it is a range of outcomes that has 10% as a kind of a midpoint, but clearly can be more than that. It could also be less, but we are clearly targeting at least 10% at the moment based on what we've seen recently and based on the assumptions that I made before. So that's as far as revenues are concerned. We confirm a broadly stable EBITDA margin with three percentage points improvement to 2019, expanding again our operating leverage. On this front, We see a potential upside as well in terms of expansion with the margin, but we really believe it's too early to confirm it because we still need to see the effect of the potential volume acceleration into our cost base. And by the way, we see many opportunities out there, and therefore we need to decide if we want to reinvest in growth, which we always favor. The combination of these two elements, I think this is really, really important. If you take this 10% growth as a midpoint and you do the same for EBITDA and you compare it to 2019, this means that over the two years we will be growing 7% on revenues and about 13% on EBITDA, which again confirms operating leverage working properly. So this is what we see in terms of revenue growth and EBITDA growth. And last but not least, we confirm a broadly stable capex intensity ratio and continuing stronger damage-based regeneration and the leveraging profile. So let me just close where I started on page 22. That is exactly the same. I started with three key messages from today. Clear recent volume acceleration growth. on the back of the reopenings that have happened over the last few weeks, definitely across the board. Growth performance for the business in the first quarter ahead of expectations with revenues plus 4% and EBITDA plus 2% and continued progress on M&A, not just on the announced M&A, but also on new, nice, additional bolt-on opportunities, simple for us to be managed and to be integrated. And on the back of all of this, we are raising our ambition for 2021. Let me stop there, and I think we can now open the floor for questions.

Excuse me, this is the College School Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Stefan Uri with Oddo. Please go ahead.

Yes, good afternoon everyone. I have a few questions if I may. The first question is to understand in your full year self-guidance what assumption you have taken for international travels. Do you assume a kind of normalization for for the summer. That's the first question. Dan, when you speak about a potential upside on the EBITDA, can you just say what you think about? Is it only if revenue is better than expected or is there anything to think about in terms of costs that you could strip out. And the last question is a little bit different. It's on the NET deal. If you can share with us what action you have taken to maybe retain the management. We know that one of the big values of this deal is probably to be able to retain both customers and management. So can you share with us if you have started to take actions on this point? Thank you very much.

Hi Stefan and thank you for the questions. Let me start on what we are assuming when it comes to international travel, international tourism. First of all, we have increased our expectations in this space as well. Despite, to be honest with you, the first quarter was pretty much in line with our expectations. But nevertheless, we have increased those expectations as well on the back of the evolution of COVID and the measures that have been taken around the world for the reopening of international travel. Nevertheless, now we're still looking at a near that remains fairly weak on this front. As you have seen, we are now moving at around minus 70% versus 2019, and we see that basically improving across the year. We are assuming basically a summer at around minus 30, minus 40, which is probably a bit better than last summer. and then continue improving from there. But this is probably the area where even if we have improved, we prefer to remain cautious. Potentially, I mean, can this be an upside? Potentially, but honestly, it really doesn't depend on us, and therefore we don't want to overshot on this aspect that has so many delicate elements into it. For you to know, because I think it's interesting, every 10 percentage points of improvement in this growth rate of international travel is about 10 million euros revenue contribution on a yearly basis on a full year basis so just to be able to kind of play with scenarios obviously we are playing with scenarios as you can understand but for the moment we feel comfortable to be where we are As far as EBITDA is concerned, to be very honest with you, we've been redoing our top-line evolution scenarios on the back of the dynamics over the last few weeks. We've been concentrating mainly on revenues because we really believe that's the priority. We still have to do more work on cost. For the moment, this is where we feel comfortable. obviously depends also on the mix of volumes that will come through. It will depend on the evolution of the commercial initiatives. And as I said before, we may have some upside here in terms of further EBITDA margin expansion. But again, if it happens and we see more opportunities of growth acceleration, we may also consider to invest more on the commercial front to stimulate further growth. So this is probably a good conversation for next quarter mid-year results. As far as NET is concerned, NET has incredible talent as well as SIA has incredible talent. We see a lot of excitement for the journey ahead for the people from all the combined groups. I had personally a very nice video with the top 250 people of SIA only last week. Yesterday was the first a video with the top 70, I would say, from Nexi and NET, and everybody is really engaged. Everybody is also already engaged into the work streams that have started already. So I really believe that's the most important thing. If you want to be more, let's say, pragmatic or hard fact-based, it's key to know that, and I just reiterated this, that a large number of all key next leaders will become at closing shareholders of Nexi, some of them in a very important way, and they will be shareholders of Nexi over the next couple of years, also with lockups as well. Their shareholders also decided to give them a specific incentive plan on the performance of the standalone business over the next couple of years again. And last but not least, and we will confirm it as we go along through the formal processes, but we plan to extend our long-term incentives program that, as you know, gives shares to to management based on share performance and cash flow generation three years after the shares are assigned to people. We will extend this plan that actually makes everybody an AXIE shareholder. We'll extend this plan to both NETS and SIA future colleagues after closing. That's the current plan. Again, it's less to go through formal approvals, but we believe it's important.

Okay, thank you very much. That's very transparent. Thank you very much for that. And for customers, have you already taken some contacts with the important SIA and NET customers?

Stefano, I need to say that formally and also in reality, I mean, we are separate companies until closing, and we need to continue to act in that way. That's, for example, one of the reasons why the working groups in some cases are working through clean teams to make sure that we don't share today information that we cannot share yet. So we're doing everything we can to prepare for that. So we hear positive feedbacks but through NET and through CI in terms of customer reactions. Some of them we know ourselves for different reasons and we see also good reactions. I think what is really interesting and encouraging for us is to see that we already have international customers, either Italian customers with international operations or international customers, international banks that are starting already to come to us asking us to engage with them as if we were already the new group because they're really looking for that type of partner on the back of what the three companies have been doing in a separate way. So we are really, really keen to engage into these conversations as one group, but we cannot do it yet. We will be able to do it soon together with NET hopefully in a few weeks and together we'll see hopefully after the summer.

Thank you very much for the details. Thank you.

The next question is from Sebastian Zapowicz with Kepler-Chevreux. Please go ahead.

Yes, everyone, and thanks for taking the question. So, SIA entered the year on a very strong note, while NETS was a little bit softer because of the comps. How do you see both companies growing in the next few quarters? Should we expect that Nets should grow at a slower pace than SIA in 2021? And also, how do you see them growing versus your own target that is now around 10%? Do you expect any difference there? And the second one would be, on the government initiatives to promote digital payment in Italy. Where are we standing right now with a couple of measures that have been launched and that will be the cashback. Could you please make an update on this initiative? Thank you.

Hi, Sebastian. Thank you for the questions. Unfortunately, we cannot talk about or give guidance for Netsensea. You've seen the performance. I think we have to take into account that, hopefully, format comparisons will become easier as the year goes through. You see that also in the countries where they're present, vaccinations are progressing very well. Reopenings are happening, especially in the Nordics and Poland. Germany is a bit behind, but our expectation is that we will see an important acceleration from now onwards on their side. I think here You also have a little bit of a reference that is an all-year-now plan that has been communicated in the context of the merger announcement, and that's somehow the base plan. And you can see that this is a plan with very important growth ambitions. When it comes to CR, again, I cannot comment in detail. I think, again, CR has some project work as well for the phasing project. depends on those components as well. But I would leave it there for the rest of the year. Obviously, we will talk more about this as we close the deals. Overall, when you look at the group all together, we see something that is not far from the vision that we currently have for ourselves. But again, this is far too early to talk about it. On the government initiatives, government initiatives are just continuing exactly according to plan. You remember there are four or five of them. They are all in place at the moment, and they will continue to be in place as far as we understand for the rest of the year. As far as the most visible is concerned, the cashback initiative, that initiative is continuing to have traction at the government level. is maintaining that initiative for now. There has been some debate, and the government is committed to continue to monitor the progress of that initiative and also consider potential ways to improve it in terms of making it more effective or potentially more efficient as well, which is also the view that we have. We believe it can be improved, and by the way, we are trying to contribute with ideas as well on that front. I know that these initiatives have a lot of visibility. We were trying to assess ourselves what was the contribution in the quarter of these initiatives. Yet, in the big scheme of things, this is probably 1 to 2 million euros in the quarter. Obviously, they are important, but they are important for the country, not really for us. Therefore, we hope they will be continued. our outlook and future will not depend on these initiatives.

One last question, if I may. You mentioned some exceptional cells linked to the banks, M&A, that have positively benefited to the CDP and the DBS divisions. Can you clarify a little bit the impact of the exceptional items in the first quarter in terms of revenue?

Stefan, thanks for the question, but we won't give you a breakdown. We have included the bullet point for completeness sake. It helped us in terms of performance, but we're talking about something which I think is immaterial in the overall context of things. Okay, thank you. That's great.

The next question is from James Goodman with Barclays. Please go ahead.

good afternoon thank you very much couple and for me please just firstly um digging back into the guidance a little bit on the top line from a phasing perspective as we go through the rest of the year the versus 2019 um commentary is very helpful i mean if i look at q2 where it seems totally logical to expect a sort of sequential improvement in growth versus q1 on a versus 19 basis if i put in something like a five percentage point revenue improvement you know i come close to 30 growth versus q2 so just want to make sure I'm on the right track there, how you think about phasing within your guidance for the rest of the year. And, you know, I'm certainly coming out with 10% more at the lower bound. So it'd be helpful just to get a sense of what you're expecting for Q2 and thinking about how that might then sort of narrow or increase the range as we move through the rest of the year, given the weaker comps clearly from FY20. Second question, I just wondered if you could give us a bit of insight into the sort of merchant behavior you're seeing in the SMB space. It's a year clearly lapped since the beginning of COVID. Any sort of signs of increased SMB churn? Are you doing anything to sort of keep those customers? I mean, there's nothing you can do if clearly there's sort of economic pressure on those businesses, but how are they faring? How's your sort of net customer acquisition looking? Just anything around the sort of health of the SMB customer base would be helpful. Thank you.

Hi, James.

Thank you for the questions. On guidance, as you know, we prefer not to give quarterly guidance because there are so many dynamics underneath. But as you can imagine, if you look at the quarter results, you still keep this 10% as a midpoint for the year. You should expect a second quarter well above that. not the yearly performance. And I would say the last couple of quarters broadly in line with that. That would be the way I would model the year. Obviously, if you compare it with 2019, instead, obviously, you would have a lighter but still positive second quarter and then improvement thereafter, material improvement thereafter. But that's the way it is. As far as merchants are concerned, I think we continue to see a very much increased interest from merchants in digital payments. I think the pandemic and the challenges of the pandemic for the businesses have increased the level of attention, the level of interest for more sophisticated solutions. this space has moved from being just a cost of doing business into becoming an important enabler for doing business. And I think it is clearer and clearer as we see the situation evolving. And this is true for large merchants, for mid-sized merchants, and it's even more visible for smaller merchants. Obviously, omnichannel is a topic being able to serve... customers at home is also a topic that's one of the reasons why for example the sales of mobile posts are trending so nicely or sales of e-commerce gateways are progressing so nicely as well but clearly there is a new wave of interest. As far as share and so on and so forth we don't see any major dynamic there but I think it's a bit clearly to assess that. I think in general, the key theme is digital payments is an important enabler for my business.

You called out, I think, MPOS acceleration in the slides. I mean, is that becoming more material for you? I mean, it's been something that's quite competitive historically. Is there any change in the sort of situation there in Italy around MPOS specifically?

Well, listen, MPOS is, and I think over time will continue to be a relatively small part of the business because the MPOS type of solutions are interesting basically for two types of customers. Number one for, let me say, the new to digital payments customers that are embracing for the first time digital payments. They want to have a light solution that normally doesn't come with fixed costs. It also comes with actually normally higher a merchant fees which is the normal economic in the segment and so on and so forth and these customers as they grow the move normally we also do what we can to migrate them to more effective traditional solutions that by the way allow them to enjoy also more efficient merchant fees as volume grow then you have a second area of application the TARA the merchants that work on the move or remotely think about the taxi drivers or, for example, the open-air markets that are nomadic, the fares, this type of situation. But last but not least, it's becoming more and more common for merchants that are already very advanced in digital payments, that do already transact a lot, to have this as an additional terminal when they need to do home deliveries, or in general, they may need some extraordinary use as an additional complementary product. That's the reason why it's a nice complementary product. It's a nice entry product, but it's not going to become the core of the market by any measure. Thank you, Henry.

The next question is from Aditya Metuku with Bank of America, Mary Lynch. Please go ahead.

Good afternoon, guys. So two questions, please. Firstly, just on looking at the growth for spending in Italy on cards, 40% up year on year is a very, very strong increase. It feels like that is basically the result of these incentives which have been put in place beginning in December. I just wondered if you could give us your thoughts around how we should think about penetration of digital payments changing as we exit this year. So what kind of run rate do you think we could potentially be at in the fourth quarter of this year? It's historically been a 25% of retail spending. Any color around how you're thinking around where that run rate could be in the fourth quarter would be very interesting. And secondly, I just wondered, given the amount of changes we've seen in digital payments in terms of trends, are you seeing anything interesting in Italy from a consumer behavior viewpoint? And also, if you could give us an update on what you're seeing on your PSD2 platform, that would be very helpful. Thank you.

Adi, hi, and thank you for the question.

Just a clarification, what do you mean with our PSD2 platform? You mean the open banking, yeah?

Yes, there's been a lot of talk around account-to-account payments, etc. So I just wondered if you're seeing anything interesting on that front.

Okay, let me try to address that as well. Listen, when it comes to grocery spending, you're right, I think that's fairly impressive. I think this is really driven by change of behaviors and the cashback type of initiatives that may be marginally contributing to this, but honestly, I mean, if you just take the full year last year, it was already growing at 22%, and last year impact was zero for cashback. And therefore, you basically see a 20% year-on-year growth last year, and it looks like it's kind of continuing this year if you take the 41%, 38%, 34% over the two years. So we really need this structural effect of that. Unfortunately, we are not able to answer to you yet in terms of where the penetration of digital payments is today. I can only reiterate what we said in the past, that we perceive that in this period, the penetration of digital payments is moving at twice the speed that normally it would have. So historically, every year, I would say with us, three to five years at least, digital payments penetration has been growing 1% to 2% per year. We have many signals that would suggest that since the beginning of COVID that this is moving above 2%, it's probably 2% to 3% or maybe a bit more than that as well. So it's too early, however, to have a number because of how much movement there is on consumer spending these days. Your second point around consumer behavior, I think that similarly to what is happening on merchants, consumers are also realizing that having easy-to-use, secure, reliable, basically tools to pay digitally is very important to simplify their lives and enjoy better when they buy stuff. And as a consequence, customers are looking for more advanced products. I think from this angle, international debit success being promoted by the banks is an example. I would say in general, our mobile apps and in general, our digital interfaces are are also another very strong example. As I've also mentioned in the past, we've been helping many, many customers that were new to using cards to buy on e-commerce over the last few months, and we see this simply continuing. I think there is a wave that has started, that has accelerated at least, and we see that continuing. As far as PST2 is concerned, there are as always several angles with the Open Banking Initiative and everything around it is progressing nicely with more banks and more third parties associated to it. Basically, it's used for many different products and services. Normally, these are account aggregation services. We're going to see more and more payment initiation services that we embed in our propositions for corporates more and more, and there is a growing interest in that space as well. And we also start to see many unexpected, I would say, and positive applications for open banking-enabled services in, for example, lending. insurance and many other applications.

Understood very clear. Are you able to comment on what proportion of your revenues are currently coming from this open banking solution? Are they material yet or are they still relatively small?

No, I mean, obviously they are in the order of magnitude of millions, but honestly it's small. It's very important for our future. It's very strategic as well. because on the back of it, we are more and more able to build new propositions, like, for example, for corporates, for example, for banks, for example, for the overall banking system, but also, for example, for public administration. It has been used, for example, to check the cross-bank, to check the address of the bank address of citizens. So there are many more applications, but for the moment, it is still relatively small.

Understood. Thank you.

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

Yes, good afternoon. Hi, Paola. Hi, Bernardo. Well done on the Q1 numbers. I had two questions. One, just coming back to the guidance, given the commentary around exit rates in recent weeks and some of the assumptions you laid out, clearly you're sort of tracking again at that double-digit clip, but Could you help us sort of frame a reference of the potential outcomes you can see? So I know you're assuming some improvement in travel, but what could a kind of a blue sky scenario look like in terms of outcomes this year? Are we talking potentially as high as sort of mid-teen growth for the year, particularly as you lap some very difficult or sort of very easy comps in Q2 and Q4? And then my second question was just around as you now approach the integration period around the two acquisitions. You've obviously got the revenue recovery happening. How do you manage against any potential execution risks, particularly given the tailwinds in the domestic market? Also, the comments you made around looking to still do bolt-on M&A in order to ensure that you continue to execute a plan, but more importantly, also as you try to sort of improve the growth of some of the acquired businesses, larger acquired businesses. Thank you.

Hi, Mo, and thank you for actually the two very quick questions. Listen, on guidance, we basically raise our expectations across companies. uh... the different uh... uh... areas of uh... on the different sectors somehow uh... from high-impact uh... consumption sectors to the basic consumption sector that to be discretionary goods consumption sectors to be international travel so we did it uh... across the board now and uh... and uh... and this is what comes through the numbers uh... and we've been uh... too conservative possibly Possibly, but I really believe it's too early to say. We cannot overshoot on the back of the trends we've seen over the last three or four weeks. There are many data points that are encouraging, but we really prefer to stay very rational, so we've done bottom-up work around these numbers. Obviously, in order to materialize more than these midpoints, of 10%, you need to see a more rapid recovery for tourism. That's actually, especially in the summertime, quite material for us. Never forget that, for example, in acquiring 20% plus of the volumes are normally coming in a normal year from this. So, for example, a key moment is going to be July, August, September from the international tourism point of view. And obviously, as we were saying before, an important theme is going to be also how rapidly there is a recovery in the more leisure-related segment. We already had very consistent high ambitions for a continued growth in the basic sector along the lines of what we've seen in the first quarter or more. We were already expecting a strong recovery in discretionary spending in basically the second half of the year, and we are confirming and slightly increasing that as well. So I think overall, this is a balanced view, but obviously, if reopening happens faster, if tourism comes back faster, we will be hopefully able to see more, but it's really too early today to talk about that. And honestly, we should also for a moment at least appreciate the fact that despite a third wave that was not expected to come when we did talk about the ambition for the year back in February, despite all of that, we are now increasing our ambition in a material way also on the back of good results ahead of expectations. uh... using the second point uh... on uh... on the how to make sure that uh... we captured the opportunities for growth in the stand-alone businesses on top of the integration of the benefits and support uh... using the disease obviously i mean the monitoring of this and the location of resources and the location of efforts across the teams is something that is super high on my personal agenda and is a conversation i'm having uh... very frequently uh... with senior leaders uh... uh... That's to begin with because we're simply closer to closing. We clearly see many opportunities around, especially as businesses reopen. And at TransLink, we see very important growth opportunities beyond what was already in the plan that require further attention or resources. We will be reallocating our efforts. Today, we are striking a fair balance in between people dedicated to the integration work and the preparation for synergies, and people are fully focused instead on the delivery. And by the way, you know, for example, that in the case of NETS, we did decide not to do any integration on the commercial operations product, innovation activities, the business unit, before NETS. some time in order to allow them to stay completely focused. And this is a good representation of what I was saying before. But we are very much aware of the fact that at the end of the day, what matters is total growth. And if it comes from a standalone or from synergies, it doesn't really make a big difference. And if we have to postpone synergies to capture further growth, standalone is going to be fine because then we'll go back and capture also the synergies. They're not lost.

Got it. Thank you very much. Thank you.

The next question is from Hannes Leitner with UBS. Please go ahead.

Yes, thanks for letting me on. I got also a couple of questions. The first one is you provided the data, how much was installed-based revenues on the card and digital payments but not on the merchant service side so maybe you can talk about that and then also you mentioned project related revenues it feels you had it across the different divisions some some product related as in cards and then also digital banking solution had a very strong quarter maybe you can comment on that and then on the second topic is around e-commerce uh yes you mentioned that you are partly impacted from from uh you know travel related vertically. But if I'm just like, can you talk to a little bit? Do you think that you will be able to, to increase the share of e-commerce within your volume over time? I mean, it creeped up a little bit in, in 20 over 19, but they should discontinue. And the last thing is just a housekeeping question. You didn't provide any non-recurring revenues. So that would be helpful just to fill the model.

Hi, Anis, this is Paolo. Can you just repeat the last question because we didn't get it?

The last question is just on the non-recurring revenues.

Non-recurring revenues.

Yeah.

Okay. Let me ask Bernardo to take the first, the second, and the fourth. Let me just comment before he does it on your point around e-commerce. Yes, we believe e-commerce over time will increase in share in our total portfolio. Don't forget that today this number is completely deviated by the different impact of e-commerce on the different sectors. As we said in the past, for example, travel is very e-commerce heavy and we have important customers in that space a year in Italy in the transportation space with no clear risk to clarify but they are obviously very important and today as you can imagine their volumes are very low and we expect the recovery there to support but yes we see an increase in e-commerce as well at the same time let me also say that The more we have an acceleration of cash to digital into physical commerce, which is what we're seeing now, the more any growth in e-commerce will be diluted when you look at the mix. So I really believe it's important to look at the growth rates, absolute growth rates, rather than the mix. I would also underline another point on e-commerce before I move over to Bernardo. That was also mentioned by Emma that in e-commerce we are able and we've been able also in this quarter to grow revenues faster than volumes. It's also due a little bit to the mix, but also to the fact that more and more we're able to sell not only acquiring, but more and more gateways and technology services on top of it. Bernardo, you want to comment?

Yeah, this last point actually, I mean, on the e-commerce front, we're growing like 18% in e-commerce gateway, let's say, activations. Sorry, so with regards to install-based, there's a big business in merchant services for us, and the mix between variable or volume-driven and install-based revenues moves slowly, so we're still around 60, two-thirds volume-driven, one-third install-based. It's actually... 60, 64%, 66%, 34%. So it hasn't really changed much over time. Both of these components, it's important to note that they grow, both because of the install base quotes in terms of number of terminals and because we're upsetting or introducing higher value added services and products into that base. But it's the inverse of cards and digital payments. Cards and digital payments, 60% install base and 40% volume. Driven with merchant services, it's the other way around. It's 34% installed base and 66% volume driven. Then question two and four are similar, I'd say. So with regards to project-related revenues, et cetera, and then recurrent and non-recurrent revenues. Let me start from the recurrent and non-recurrent revenues. We've stopped giving the split because it stopped being material. This is a legacy from our IPO days when we had recently completed an acquisition of a company called Basiliki that had a large business in reselling Microsoft softwares, you know, ATM machines, POS terminals, et cetera, at zero margin. And these were businesses we exited because they made no sense for us. We were adding little value to them. And therefore, we had to give a year-on-year comparison of, you know, gross of reselling, net of reselling. Now that business has shrunk to almost zero and it's irrelevant. So everything we do has a margin. and everything we do is core business, so there's no point in, they're all, I'd say, recurrent revenues, or there's no point in differentiating. And this, I think, ties with your second question, which was regarding project-related revenues. Most of our revenues are volume or install-based driven, but every year we have single-digit million euros, maybe low double-digit million euros out of 1.1 billion of revenues, which is project-related work or activities we carry out for our customers in order for them to adapt their technology, upgrade their technology to new product services or banking mergers. And this is true every year. What we have done is highlight how in the quarter we just had a marginal benefit year on year in these two divisions, in cards and digital payments and in digital banking solutions. But we had some of those revenues last year, some this year, and the marginal difference is slightly positive, so we highlighted it. But we're talking about, you know, a couple of million euros here and there.

Okay. Thank you. And so actually I mentioned on non-recurring rather more the costs associated on the EBTA impact. But I saw that you actually didn't provide it last year either. So in terms of installed base on the data you have given, the installed base revenue seemed to have increased by over 10% year over year. especially remember last year due to the pandemic, you have quite emphasized on the install-based revenues. So that means that the transaction-based revenues declined by 6%. We should see the reversal or is the install-based revenues, did you mean there are some certain contracts which have here a stronger baseline? Could this be associated with the Intesa deal? just to get an outlook for the rest of the year. Is this driven the recovery and the upgrade from the guidance based on the installed base revenues or rather more on the volume trading revenues?

Thank you. I'm not sure to follow the calculations you were doing, but basically, in merchant services, as we speak, the installed base revenues are broadly broadly flat. And with the increased expectation is mainly driven by volume revenues, volume-connected revenues on the back of what I was saying before in terms of an improved outlook for the recovery. And always also remember that the elasticity and the speed of reaction of these two components is completely different. And I mean, install-based revenues move very slowly while the volume revenues can swing very, very, very fast. Again, I don't know if you're referring to it. I just want to reiterate to avoid any confusion into our updated ambition. There is nothing about the UBI book acquisition. I want to reiterate that because that's not a driver of the increase.

Thank you. Good luck.

Thanks.

The next question is from Gianmarco Bonacina with Equita. Please go ahead, sir.

Yes, good afternoon. Two questions. The first one is a kind of follow-up to the previous one. So on the full year when your ambition to grow about 10% revenues, would it be fair to assume that you expect double digits for volumes and maybe mid-to-wide single digits for the install base, which clearly... historically as lower growth versus the volumes. The second one on the net debt, which in the quarter sequentially had a huge decrease. I think it was higher than the EBITDA. I guess probably is linked to the accounting for the convertible. If you can maybe give us a little bit more indication in terms of the underlying free cash flow excluding the convertible. Thank you.

Hi, Marco. On the first one, I think you are broadly right in the sense that it's driven by a volume dynamic that is closer to double digit than it's also a matter of mix. But at the end of the day, compared to 19, I'm always comparing ourselves with 19, but that's at the end of the day, the underlying hypothesis is when you put everything together. and install base growing instead more low to meet the single digit type of thing. It's a little bit historically we've done. Bernard, do you want to comment on that?

So that follows, as you were saying, the calculation follows the counting treatment of the convertible bonds, so the bifurcation of the bond component from the equity component and the option we sold. If we had accounted, let's say, just as if it were a simple bond, the 3.2 leverage would be 3.3. But I think it's standard practice to follow the accounting treatment, and that's the way we have accounted for it, similar to other issuers with convertible bonds out there.

Thank you.

The next question is from Paul Kratz with Jefferies. Please go ahead.

Hi. Thank you very much for letting me on. I just have two questions on my end. I mean, thinking about the UB deal, is there any impact that we need to take into account on the issuing side? You know, just in terms of how that relationship, I guess, with UB might change as a result of emerging with Intesa. And then, you know, I think the other question that I also had as well is when we think about NETs, And, you know, the tech stack segment of all of this, I mean, this seems to be a really big selling point of the whole deal. I mean, is there any color that you can provide around preparations that you've done around, you know, kicking off some of the platform migrations that are critical to recognizing synergies? And then just finally, you know, is there any color that you can give just around the Intesa contribution in the quarter? Thank you.

Hi, Paul.

I'll let Bernardo to handle the third question that hopefully is clear to him. Otherwise, we'll ask you to understand it better. On the first two points, UBI, let me just recap because I understand that it's one of the many, many things you're looking at. UBI Banca has been sold last year to Intesa, and we were already serving it. both UBI and Intesa. In the context of the deal, one-third of UBI assets, both merchants and cards, and customers more in general, has gone, has been bought by BIPER that we also serve on both merchants and cards. So now when it comes to the deal we've done now with Intesa on the merchant side, this has actually nothing to do with the issuing side. On the issuing side, the cards of Ubi customers have already been migrated. This is actually a piece of the work that Bernardo was mentioning before when he was talking about project work for banks. Those cards that were with Ubi have been already migrated partially to two-thirds basically to Intesa and one-third to Beeper or in the progress of the Migrator, depending on which business model we are talking about. And at the end of the day, overall, the economics on that component of business become kind of neutral for many, many different reasons. When it comes to the technology stack of NET, but I will say more in general, the future of the group of We have an amazing pool of technology experts across SIA, NETS, NEXI, that are working together, again, within the boundaries of what can be done and so on and so forth. But they've been working together over the last two or three months already to prepare for the development of the next generation structure for the group. There are many different streams. by vertical for acquiring gateways, infrastructure, security, and this is all soft pause, all these fronts. And by each vertical, they're identifying basically two things. What is the next or what are the next generation solution for the group? Normally leveraging on something that was already there or was already under development for the group. And at the same time finalizing the synergy plans as we shut down some of the more legacy platforms and we source activities that we were doing with third parties. So this is the work that is being done. I mean the synergies available out there. are very, very visible and are being confirmed, potentially increased. There is a lot to do. We knew that, but we are super happy because there is a super strong team in SIA, in NEXE, working on this, and this is the real asset in the end. We will have, in the end, more than 2,000 people working around technology, innovation, products, and this is, in the end, the real asset. By the way, Both companies, I'm talking about SIA and NETS in specific case, continue to win new business in complex environments thanks to their technology capabilities. So that's very reassuring as well. On Intesa, Bernardo?

Yeah, on Intesa. So the mechanics of Intesa are exactly the same as the ones that we had negotiated for the previous deal we closed last year. So what Paolo mentioned earlier is that although legal closing of the transaction, so when the title of these merchants passes to Nexi under the framework agreement we have with Intesa, we will still accrue, even though that closing will happen in the second half of this year at some point in the fall, we are accruing the benefit of ownership as if we had closed that deal on the 1st of January of this year. So when we actually close, we will give you numbers which are pro forma back to the 1st of January, and we will get the cash balance generated by this business as if we had owned it from the 1st of January without this changing. So embedded in the $170 million price we paid. So for all effects and purposes, it's as if we had... close the transaction on the 1st of January this year. It's just that we need to wait mechanically for... Essentially, it's an IT issue in terms of sequencing. Given the amount of stuff going on with Intesa, we agreed that the right time to migrate onto our platform, which is the Intesa platform, rather than the Ubi platform, which was our platform anyway, is in October. But we have been working with Intesa as if these merchants had been, let's say, Nexi merchants for quite a while now. I hope that answers the question.

Yeah, just I wanted to follow up. I mean, we obviously will have the contribution from Yubi, but is there any color you can give just on Intesa standalone? I mean, I appreciate the book was a little bit different from, I guess, the rest of the group. So it'd be great to have a little bit of color. And then maybe just also one other follow up. You know, I appreciate that with NET, the requiring platform is basically a target platform that you guys are working to migrate to. I mean, the fact that you guys are still operating independently, does that affect the way you think about the timing of insourcing your acquiring processing? And, you know, is there any color you can kind of give just around timing on that?

So I'll just complete the comment on Intez and then hand the floor back to Paolo so we can tell you about our approach to integrating with Next on the IT front. So with Intesa, we don't disclose individual clients' performance, etc., so I'm not going to do that. I will just refer you back to comments we made last year, and we're happy to make again this year in terms of the performance of Intesa book, which is a very strong performance in general. Intesa is a strong bank in the market, and if you saw the results Intesa published the day before last week, I think what we said was last year the mechanics of our agreement with Intesa afforded us some protection in the difficult months. You remember that in our distribution agreement, We have downside protection, where Intesa basically guarantees a certain level of performance to us. And that guarantee actually kicked in during the course of 2020 and helped us achieve the results that we achieved last year. This year, it's not been necessary because the book has performed very well, in line with the performance of the overall business for Nexi in Italy, as you saw from volume performance. Paolo?

No, listen, let me try to clarify better and then maybe we can follow up on this one more precisely. But in general, you should not look at the platform as one platform because in a business environment, that is so extended across different verticals, different products and services. We don't have one platform that we choose. So we're not choosing the next platform across the board. We will actually use it for every vertical that was mentioned before, issuing, acquiring, gateways, infrastructure, security, and by the way, in some cases, subsegments as well, and by the way, different components. We'll be using the best of both of what the different entities have developed or are developing. So in some cases, we will be leveraging, for example, some super advanced pieces of technology that NETS is developing. In some other cases, SIA is developing. In some other cases, NEXI is developing. From this point of view, I think the work that is being done right now is actually all the planning and the preparation for the execution. And at least for the moment, we don't see any limitation from the fact that on the next side, we will integrate operationally a bit later and never forget instead that we plan to integrate faster on CSO. For the moment, we don't see any impact, but as always, we'll adjust the plan as we go forward. as we move if necessary. But you should look at it as the best of brief, the combinational best of brief, and the teams are working together on this as we speak.

Perfect. That was really clear. Thank you.

Thank you.

The next question is from Alexandre Faure with Exxon BNP Varibas. Please go ahead.

Hi. Good afternoon. Thanks very much for letting me on. I had just a couple of questions, if I may. One is a comment you made, Bernardo. I think you mentioned an increasing card stock in Q1. I was just wondering if that was based on market share gains or rather your existing customers who might be a bit keener now to hand out cards in a post-pandemic world. So that's my first question. Second question is around the appetite for further bolt-ons that you mentioned, Paolo. Just wondering if you believe that this will happen in Italy or perhaps you've exhausted the market there and we should think Eastern Europe, Greece, other parts of the new footprint and what sort of timeline should we have in mind? Do you think you might still announce something new in 2021 or that's being too demanding? Thank you.

Thank you very much. Hi, Aleksandra.

Listen, on Cardstock, if I can probably try to give the simple answer, it's a mix of things. So you have some growth in the base, but you also have some evolution in terms of product mix and upgrade of the product mix. So the revenue growth is not coming from more cards. It's also coming from... the same number of cards but becoming more valuable for the customer and therefore for us. So it's a combination of both. So there's some new customers for the banks, some migrations to higher value products, some big migrations, so it's a little bit of a combination. When it comes to M&A, as you know, we are super focused in making happen what we have already signed, and therefore the NET and SEER combinations. But as demonstrated, it will be as, by the way, NET as demonstrated in Finland recently and in Switzerland a few months ago. we will continue to capture opportunities in markets where we are that allow us to strengthen our position in those markets. So obviously we remain exposed to potential opportunities in Italy as well, especially if they allow us to follow and to enable to contribute the strategy of our partner banks. So these are conversations that we always have – that we had in the past, we continue to have in the future, again, driven by their strategies. But as we speak, you should imagine that there are a few conversations outside of Italy, and this is something that we said in the past as well on the various fronts. Again, small things, easy to be integrated, easy to be managed, not interfering with the big deals, actually strengthening the value of those deals.

Of course. Thanks very much.

Thank you, Luciano.

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

Listen, thank you. Thank you for attending this call. Thank you for your questions. As you know, we'll be very happy later on today, if you wish, but over the next few days. To continue the conversation, and we'll meet many of you over the next few days and weeks, and therefore looking really forward to continue all of these, again, simple messages from today. Visible recovery of volumes and acceleration of volumes on the back of the reopenings with a positive outlook now, also on the back of the vaccination plans. Good, strong performance compared to expectations today. in the first quarter on both revenues and EBITDA. Good progress on M&A on various fronts. All in, we feel comfortable in raising the ambition for the year under central assumptions, but we are happy to do it. Thank you very much to all of you, and I'm sure we'll talk soon on the various fronts. Bye-bye. Have a great afternoon.