Nexi Spa Azioni Ordinarie

Good afternoon. This is the Coral School Conference operator. Welcome and thank you for joining the NEXE third quarter 2021 financial 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.

Good morning. Good morning to everybody on this call, and thank you for joining us in our third quarter results session. As usual, I'm here with Bernardo Mingrune, our CFO, and Stefania Mantegazza is leading investor relations, but we have also a few other colleagues connected today. and here with us in case it is needed. As usual, I will start giving you a little bit of an update on where we see the volumes going and evolving on the back of the evolution of COVID, and I will also give you a short business update with focus on merchant services. Then I will hand over to Bernardo who will cover financial results. I will come back to give you a quick update on where we are in creating the European PayTech Leader and bringing the new group together. And obviously, I will conclude commenting on guidance that, as you know, has been confirmed for the full year already. Before I go in, let me remind to everybody this is the first time for us in presenting the aggregated numbers of NEXI and NETS. Last time, you may remember, Bernardo gave you an overview of what the profile of the new group would have looked like to kind of introduce the topic. This time, we are reporting integrated NEXI and NETS. We will cover the performances by region, which we give you an indication of how things are going. We'll probably make a few more comments on the standalone performances, but as I said, we are reporting for the first time in an integrated way. And then at the end of the presentation, we'll have time as always for your questions. Now, let me start as usual with the messages at page three. The three messages basically are reinforcing the same three messages we had over the last couple of quarters. Number one, we observed continued volume recovery and acceleration across the various geographies. In Italy, we continue to see a strong volume performance with Italian cards growing anywhere between 20% to 25% versus 2019, that again, I remember to everybody is always our benchmark year because it was pre-COVID year. Next to Italy, we've seen also a good recovery in the Nordics that came back to positive over the last few weeks as a total, with some stronger performances across many sectors. The DAF region is still recovering, not back to the previous level at full, but actually seeing a strong basic consumption growth. And also, more recently, we've seen the discretionary sector coming back to positive here, The travel sector impacted that for our business there. Still relevant in volumes is the one that is still behind, although recovering. Third point, we see an acceleration stronger in SMEs than in LACA. This has to do also with the different profiles of SMEs. the different sectors in terms of mix of SMEs and lack, but we believe this is really positive for our positioning and for the outlook as well. And last but not least, we continue to see clear signals of acceleration of cash to digital payments transition across all sectors and visible in all geographies, also the ones that are already more penetrated. Message number one. Message number two, also in the third quarter, we've seen stronger and growing financial performance. Revenues for the group were up 10.1% in the quarter in acceleration versus the previous two quarters for a total of 9.6% in the nine months. We've seen, in particular, strong revenue growth performance in venture services and solutions for both NEXI and NETS. At very similar levels, plus 12.2% for the total in the third quarter, 10.6% year-to-date. And again, here you see an acceleration. E-commerce revenues were particularly strong at plus 32%, despite the fact that the travel-related sectors are still affected by COVID. EBITDA in the quarter was up 14.6%, up 12.3% from the beginning of the year with continued margin expansion that in the third quarter was at 53% up to percentage points versus last year. Third message, we continue to progress in the creation of the European Paytech leader. SIA has reported again stronger standalone performance and will comment on a dedicated page. As you know, we have received the antitrust approval on October 14th on the combination of Nexia and Sia, and the closing is now expected by year-end. In the meantime, we have closed the deal with Impeza on the Ubi merchant book. Yesterday, we have also signed the deal with Alphabank to create a joint venture in merchant services still in Greece. Closing is expected at some point. in the second half, probably the second quarter of next year. And last but not least, we made a small but actually strategic investment for our future in a company called Orderbird and is the leading DAC commercial software solution for the hospitality sector present also in other geographies. It's a small investment, talking only about 16 million euros. We have increased our ownership from 20% we were already there to 40% with a clear path to control and we are very happy for this because it's the first real FML test for us in entering in a deeper way the software space especially for SMEs starting from Germany that is a very strategic market for us and expanding in other places as well. On the back of all of this we have confirmed our ambition for 2021 on a Nexinet combined level. Revenues, we expect them to grow at about 10% year over year, and EBITDA, we expect EBITDA to grow at 11 to 13% year over year. Now, before I go into volumes, let me jump to page five. As a quick reminder, this is the new profile of the group. We have a group that sees about 60% of the revenues in merchant services and solutions with a strong exposure to e-commerce. 29% is what we call cash and digital payments and the remaining 10% in what we call digital banking and corporate solutions. Second, the group is highly, highly exposed to markets with super strong and very, very long-term and secular growth opportunity in digital payments, 71%. of our revenues are in low penetration markets such as Italy, such as Germany, such as the Central European ones and Southern European ones. Number three, 64% of our revenues are coming from volume and 36% from installed or installed like type of revenue. Last but not least, we have a fairly strong operating leverage. Now, let me jump into volumes and cover Italy first, and then I will also give you an highlight on what we see happening in the other key geographies. Page number six is the usual page. The dark blue line is the total here. We are focusing on merchant services. where we have more insights and therefore the dynamics are more interesting. The dark blue line is the total. The lighter blue one is actually on Italian cards. The gray one is on international cards and therefore visitors to Italy. Here you see that after the summer we continue to basically grow revenues compared to 2019, anywhere in between 10% to 20%, sometimes also above 20%. And here there is a clear strong contribution from Italian cards that have been growing anywhere in between 20 to 30% over the last few months. I would say particularly interesting is also the dynamic in the international visitors cards. Here you see that we had a very, very fast recovery in the summer leading to August where we went back to the levels of pre-COVID. mainly driven by European visitors with Americans and Asians being still not present or present in a very limited way. Then with the slowdown again, but then a strong recovery over the last few weeks, this dynamic is probably explained by the fact that the touristic side of international travel is recovering fast. People are really keen to travel as soon as they can do it. Well, actually, the business traveler dynamic is still behind and therefore depending on the moment of the season probably we'll continue to see these dynamics happening. Hopefully the recovery of October is also due to the fact that we had less restrictions also for business travelers. So it's a combination of business travelers coming a bit back and actually holidays in some countries in Europe in the latter part of October as well. Jumping to page seven, we have the usual split by macro sectors. This is the total, so this is not separating Italian cars versus international cars, and therefore the sectors are also affected by the dynamic that I was explaining before. Here we see very strong continuing growth in the basic consumption sectors like groceries, utilities, medical and so on and so forth, growing anywhere around the 30%, 34%, 37% in the last week. And we see the other two sectors now moving kind of similarly, anywhere in between, I would say, 5% to 10% year over year, with a super strong recovery, I would say definitely faster than expected, in particular in the impact sectors, and I would say in particular in restaurants. and bars. So this is the dynamic we're observing in Italy. We'll come back in a moment to give you a bit more insight on specific subsectors because I think it's interesting. On page 8, we see instead the dynamics, we observed the dynamics in the Nordics area and in the DAC region. If you just take the total before going to the subsectors space, we have observed a plus 12% growth in October across the net, if you like, geographies, 12% growth of our SMEs versus 2019. LACA, instead, we're still behind. But actually, if you strip out the effect of the impact consumption sectors growing as well, plus 8%. Last one, please. We also see a good recovery in issuing and now growing at 5% in next geographies and basically this is mainly relating to the Nordics. As we're talking about the Nordics here, you see in the top graph, the dynamic Nordics have been back to positive from September and actually growing further in October. As a total, they've been growing 7% versus 2019 in terms of volumes. Actually, the last week was actually double-digit with 12%. Very strong and continued performance on the basic consumption sectors, above 30%, actually 45% in the last week. The discretionary consumption sector trending a bit slower, but now close to zero. And a good recovery over the last few months also for the high-impact sectors also. over the last month at minus 1%. Last but not least, in the DAC region, and here most of the volumes are actually associated to Germany, here you see a continued strong performance of growth in the basic consumption sectors. You see actually discretionary services going back to a positive 8% last week, 2% in October versus 2019. Here, the sector that is still behind is actually the one that is related to travel. And here in Germany, this is an important impact on the total mix, and this is one of the key reasons why actually Germany is still behind compared to 2019 volumes. So this is the total picture, page nine, a bit more into the specific sectors to reinforce the point that I think we made over the last many calls. I would say that we have been observing underneath these COVID-related dynamics a very strong acceleration of the transition from cash to digital payments, not only in under-penetrated markets like Italy, but also in more penetrated markets like the Nordics. And here you see at page nine a few examples here with the peak from top to bottom, the top eight sectors per market. Some of them may be less relevant in size, but here you see actually also very relevant sectors. Think of the restaurants and bars in Italy, 34% growth, or groceries, 25% growth, nicely growing, all double digit next to some very special ones like doctors at 82%, for example. Nordics, similarly, groceries, 25% versus 2019. Again, for a market that we tend to believe that is already highly penetrated, it's a big positive in our opinion. And then you see some more specialized and smaller sectors such as, for example, cosmetic or hardware growing at 40%, 59%. and so on. Last but not least, also in the DAC region, grocery is 49%, also restaurants, despite some limitations being still in place, 13% and many other sectors growing double-digit, with actually department stores growing triple-digit, but I would look at it with a lot of sympathy that it's probably not the benchmark for the other sectors, at least not for now. So, this is basically the picture in terms of volumes. Before I hand over to Bernardo to cover financial results, I would love to dive with you for a few minutes on the dynamics and the key initiatives that we are observing, in particular in merchant services that, as you know, is more than half of our revenues and is always up here focused not just for us but also for you and for investors alike. more broadly. And here we try to give a little bit of a feeling of what we're doing in the different segments. And it will be covered by SMEs that represent almost 60% of our revenues in Merchant Services. Ecom that represents about 25% and also LACA that is a bit less than 10% of total revenues. If you're asking yourself why those are mapped to 100, the reason is that There is a 7% that has to do with acquiring ATMs, as we call it, cash, and that is not allocatable to any segment. For simplicity reasons, we have allocated post-terminals revenues to SMEs because most of it is really SMEs. Now, going one by one, in SMEs, we see a strong acceleration on our digital proposition in Germany. positive results in Germany, on the back of the very positive results we had in the Nordics, as well as in Italy, we are promoting more and more the mobile post proposition for new to merchant subsector. At the same time, we are very successfully pushing on vertical propositions in the specific sectors. We started in Italy with dedicated go-to-market for very narrow verticals, for example, restaurants, cafes, hotels, retail, and so on and so forth, where we package very often from the distribution, go-to-market point of view, but sometimes also pricing and product itself and this is really hitting the ground well with customers. At the same time, we are increasing our focus on ISVs and more in general the software space. And here, basically there are two things we are doing. On the one side, we are expanding our partnerships across all geographies, I would say, with ISVs. And if you count them across the board, we count them actually for this call. It's actually more than 500 partnerships in the ISV space. And there are a mix of partnerships with local leaders on merchants, CRM, and ERP softwares. For example, Team System needed just to mention one. And many, many, many smaller, much smaller vertical specialists that very often are local partners. companies as well and we normally partner with the technical integration with some of them we do also go to market together as anticipated now with Ardabird we're going one level deeper as now we will integrate more on the proposition side as well and we'll test it in one segment in one market to expand it further as we go along. In the S&E segment, basically, we have not seen any major news in terms of competitive dynamics. We know, I mean, we discussed it in the past, that we have important competition in the new to digital payments segment, the smaller merchants that are starting to use digital payments for the first time, in particular in Italy, in particular also in Germany, from basically one player uh... that either some app that actually successful in the market in winning a number of customers but actually the value associated with these customers that even the size of them that is uh... normally very small uh... we have also increased in italy our focus uh... in uh... that segment and we're actually quite successful with double the now our acquisition bonds but it was a focusing at in that winning back these customers as they grow and when they need a proposition that is more structural and more complete. This is it in terms of SMEs. The volumes across our geographies were up about 14% in the quarter compared to the same quarter 2019. E-commerce that represents about 25% of our revenues in merchant services is seeing a lot of dynamics, a lot of new players coming, some of them going as well, to be honest with you. And by the way, this is a sector where we have a new segment and new propositions emerging as well. We maybe talk more about it in our Q&A sessions, but let me give you a flavor of what we are doing here. First of all, when it comes to the more PSP-like type of proposition for the acceptance propositions, we are launching easy in Germany after a pretty good success in the Nordics as a collecting PSP proposition at the same time. We are extending our PSP proposition in terms of capability in Italy. It's called XPAY. And we are extending this proposition also on the back of the experience and the capabilities that we have in net, for example, in one click checkout and cart pre-onboarding. In the nine months, our e-commerce activations in Italy have been up 70% compared to the same period two years ago, just to give you a flavor. At the same time, we are seeing a lot of activity in the alternative payment method space here. Our angle is twofold. We know, we own alternative payment methods, and at the same time, we partner with third-party payment methods to make them available through our gateways to our merchant customers. If you focus for a moment on account-to-account propositions, We actually have a very strong position, a successful position, both in Poland and in Finland, and they're growing very, very strongly. At the same time, we are onboarding more and more account-to-account solutions to our gateways, for example, Bancomat Pay in Italy. Similarly, in Buy Now, Pay Later, we have a very strong proposition called Rate Pay in Germany. We own that proposition. That proposition is growing very, very strongly. But again, this is a proposition that is made available not only through our gateway solutions in Germany, but also to basically every other national, international PSP active in the country. At the same time, in the other geographies, we are partnering more and more with PAPI, by now, Pelletier Providers, because at the end of the day, as a PSP, we must be able to offer all possible payment methods to our merchants customers in order to allow them to basically maximize their conversion rates at checkout. Last but not least, we continue to strike partnerships with e-commerce enabler platforms across all markets. We have more than 10 partnerships across the group. Many of them are with players that are present in more than one market. Today, we cover about 76% of the market. Today, e-commerce enables cover across our geography about 10% of the volumes that basically serve the tiniest, the micro merchants, the micro SMEs in e-commerce. We cover through technology integration and in certain cases also go to market partnership, 76% of that. Again, here volumes are growing 13% despite the travel related sector still being suffering. The reason why the growth rate of revenues is actually well above 30% is because when it comes to account to account and by now pay later solutions that we own, the growth rate is very, very strong and it's contributing to the total growth. Last but not least, the lacquer segment represents about 9% of all total revenues in merchant services. Here, we don't see any major news in terms of competition. Obviously, we continue to see active, very active players like Adyen in very specific segments that are basically segments of the global brands, in particular, I would say, in luxury and in fashion. To be very clear, we continue to compete successfully and win in the sectors that instead are more local in nature, such as, for example, food retail, household goods, mobility, insurance, public administration, and so on and so forth. Basically, we win and continue to win where the physical component of the omni-channel solutions is actually relevant for these companies. where they have complex needs in terms of terminals and terminals acquiring acceptance integration, where the local integration with local payment methods is important, where the vertical sector integration is important, where customization is important. At the end of the day, that's the core of what we do thanks to our local entrenchment. And here we continue to serve successfully not only the local customers, large merchants, but also global brands that are present in market with the characteristics I just described. So across our geographies, we cover and serve merchants such as, for example, IKEA, Sky, Decathlon, Vodafone, Zara. I mean, names that are clearly international names, but require very specific local support, integration, and delivery. Now, before I move on, let me use one example of something that we have announced yesterday. It is actually today's mold, but I think it is also a good example of what we see as the core of the nature of the new NAICSI group. I think we said in the past in many one-to-one conversations that at the end of the day, our strategy is quite simple. We want to combine the scale that is necessary to drive hard innovation, digital innovation in particular, and we understand competence is important, investments are important, therefore we need scale. So we want to remain competitive with the global players, specialized players when it comes to product proposition innovation. But at the same time, we also want to be very, very locally entrenched, thanks to our people, thanks to the ecosystem integration that we have in the different geographies. And one simple example of this, on top of the many I gave to you over the last few minutes, is to do with a product we launched yesterday. It's called Pago Inconto. It's translatable as pay-by-account. It is a very nice product because it is an account-to-account payment product that we are making available to begin with in e-commerce, but will be available also on omnichannel solutions for LACAs and SMEs as well. This is actually integrating many capabilities that we have in Nexi, not only in merchant services, but also in the payment space, in the open banking space, to deliver a solution that we are making available to our PSP merchant customers, and I would believe progressively also to other PSPs that want to operate in Italy, and this solution is basically leveraging open banking enablement that we provide because we are the provider of the open banking system for Italy our capability in this space plus our local licenses plus our local integration plus our local capabilities on the e-commerce side and basically a merchant can offer the opportunity to its own customer to pay by the bank account without pre-registering on anything because thanks to open banking the customer will find a click bottom on the checkout page and we click on the bottom then basically the page of the bank will open, the customer will identify himself with the standard identification method of the bank and the transaction will happen because it will be pre already filled on the different components of the transaction itself and the reconciliation will happen automatically. Again, it's a small thing, but I believe it gives you an idea of what it means not having global scale, but also being locally entrenched and integrated. Clearly, this is targeting not necessarily the small transaction, but actually the large transaction, because being pay-by-counter, you can pay for the moment up to 15,000 euros per transaction and going forward even more. Let me now hand over to Bernardo. Sorry if I took a bit more time here, but I really wanted to try and give you a flavor of what is happening in this space. Bernardo.

Thanks, Paolo. So just we'll try and be quick here, so we leave as much space as possible for Q&A. Starting on slide 12, we've seen how revenues have grown approximately 10% in the quarter and 10% for the nine months. As Paolo said earlier, this is how what we discussed in terms of volumes and in terms of the business updates translates into the financials. I think it's important to underline how growth in revenues was very similar to both NETS and NEXI. I guess that's the message I would like to leave you with. In terms of EBITDA, we can see there's been a two percentage point accretion year on year in the quarter and the same applies if we look at the nine months. Most of this accretion actually comes from NETS. We have less of an accretion this year on NEXI as we've discussed in the past due to the fact that we're unwinding or Let's see, coming out of last year, we have the effect of certain costs, the cost-cutting exercise we had last year, which impacts our growth in costs this year as expected. So two percentage points, accretion, which is in line with our expectations. On slide number 13, we see how the various geographies performed. Italy, a strong performance in the quarter with 12% growth accelerating compared to compared to 12% versus 2019, accelerating compared to the 8% we had in the first nine months. So again, good signs of recovery from COVID. DAF in Poland had even stronger growth. We have close to 18% growth in nine months, 19% if you look at it in the quarter. Actually, Germany growing more than Poland, thanks to the strong exposure we have in Germany to e-commerce and BNPL, which Paolo also referred to earlier. In the Nordics and Southeastern Europe, a slightly different dynamic. Again, there is less exposure, I would say, to e-commerce compensated in Germany and Poland for the slow recovery in terms of coming out of lockdown in some of the geographies NETS is present in. Plus, as we will see later, the effect in the Nordics of, as we had mentioned in the past, the fact that we have renegotiated the last major contract at NETS, and that has hit us in 2021. Moving on to the various divisions on site 14, we have merchant services and solutions, where we've had a very strong quarter with double-digit revenue growth across the group, and this is true, as I said, both at NEXE and at NETS level. NETS has proved to be extremely resilient in all its geographies, We can see that transactions have recovered very nicely throughout the group. In Italy, we have 15% year-on-year growth for the nine months, and this was only partially offset by slightly slower growth than some of the other geographies due to the different phasing of lockdown. I think it's important to underscore how e-commerce has continued to grow nicely. We have 37% growth in the third quarter this year, 32% if you look at the nine months, and This is also sustained, as I said earlier, through a strong performance in Germany and Poland. Just a word of explanation with regards to a trend which in the past has been different in terms of the growth in volumes of international schemes, which is lower than the overall volume growth. This is due to a factor in Italy of domestic debit cards now being able to transact contactless, transacting on the domestic scheme rather than than international schemes, and this has caused this inversion of the trend. On site 15, we can see the data for cards and digital payments. Even in this division, we have good revenue growth with good volume recovery. Here, the volume recovery, as you can see, is what we're more used to, where the trend I highlighted earlier of the shift to domestic debit in Italy on contactless transactions is more than offset by the fact that we are progressively moving our domestic debit cards into international debit cards, which fuel the growth in international schemes. But overall, we have strong growth in the quarter also in cards and digital payments. Slide 16, we can see how DBS or digital banking corporate solutions is now called performed in the nine months. This, we've discussed this in the past, is a division in which project-related revenue, which is recurring by nature even though it's not contractualized, but every year we have project work for our partner banks mainly in the various geographies, has been, from a seasonality perspective, present in our P&L more in the first half of the year, hence the deceleration you can see from 11% to 5%, so 11% for the first nine months and 5% for the last quarter. Overall, I would say that performance has been in line with our overall expectations. Maybe in Italy, we have had a bit of a slowdown, which has impacted us this year on Montepaschi as they were discussing a potential transaction with Unicredit. That is no longer the case, so hopefully we'll recover some of the lost revenues there in 2022. Slide 17 shows us the cost dynamic. I think it's important to look at the commentary we put into the side of this slide where we try and give you a picture of what the cost dynamics really look like if we normalize for last year. I mentioned earlier that at Nexi we had, I reminded you that at Nexi we had a cost containment program which was 100 million euros of cash cost cut last year to protect our P&L and our cash flow. This unwinds this year, and hence we have a bounce back of accruals on variable compensation, a bounce back of travel expenses and the likes. If we normalize for those, I'd say, two items in HR costs, for instance, the overall HR costs would actually be flat year on year. There's some slight, let's say, increase due to the annualization of people who were hired last year. But overall, basically flat HR costs if we normalize for variable comp With regards to other non-HR costs, these will be up 1.4% if we normalize for the growth in volume. So, effectively, obviously, revenues are growing. We've seen double-digit. Our cost base grows by 1.4%, showing if we take out the growth in volume-driven processing costs, testament to the fixed nature of most of our cost base. With regards to... say, the net debt position of the group. We should look at it with SIA, or at least I look at it with SIA included. We have received antitrust approval, and Paolo will speak to this in a second. But basically, now we have deal certainty. If we look at the combined numbers, both of net debt and EBITDA, so adding on to our last 12 months, EBITDA also sees 327 million euros of EBITDA for the last 12 months, and we include CES 820 million euros of net debt, our overall ratio is 3.6 times leverage, which is three times if we include also run rate synergies, which we announced as part of this transaction. And this we expect to unwind pretty quickly in the leverage with the profile we highlighted in the announcement. Just a reminder that three quarters of our indebtedness is fixed rate, so moving into, let's say, a potentially high rate environment, I think we feel pretty comfortable with regards to our capital structure. So that said, I will pass the floor back on to Paolo so he can take us through the M&A updates in closing remarks.

Thank you, Bernardo. Page 20, a quick update on CS. He reported over the last few days the results for the quarter. The revenues were up 9.3%. And EBITDA was up 12.9%, so very close to the rest of the group performance. Year-to-date results are even higher than this. I think as we anticipated at the beginning of the conversation around SIA, the first half of the year is a bit richer than the second half, basically due to phasing and very specific events and nothing to do with underlying it. As far as the closing agenda is concerned, as you know, the Italian antitrust has approved the deal on October 14th. There were remedies specifically in the areas that are connected to national products, and this is something consistent with what our expectations were. We believe it is very much correct. In terms of remedies, there is only One of them that is structural and that remedy has to do with what I would call the national clearing, non-SEPA clearing. To be precise, the size of that business is about 6 million euro of revenues full year, about 2 to 3 of EBITDA, more or less, with, by the way, revenues declining because we are talking about products such as, for example, checks. We will be obviously implementing the work to implement these remedies as we speak and we expect to close by the end of the year. We still have two or three authorizations missing but they tend to be either a bit more technical or in any case due at the end of the process such as for example the talent stock exchange regulator for the approval of the prospectus. And everything else is in line in terms of preparing for the execution of the closing within this timeframe. On page 21, you have a bit broader update on what is happening on the various fronts. You may remember we detailed in the past how we're structuring our transformation plan on different work systems and so on and so forth. A quick update on the technology side. Basically, we already have a one new group technology plan and already started to execute around some areas, for example, CapEx savings and duplication, pulling together group digital delivery under one hub, optimizing infrastructure, ready to execute processing platform consolidation as soon as we close SIA and many other areas of initiatives. As far as institutional operational excellence is concerned, we have already started to optimize to novel management in the HR side, and we are ready to execute the full integration of Nexia in Italy, while there are many other operational excellence initiatives already ongoing. As far as procurement is concerned, we started working on this a few months back, and we have a very detailed plan defined and we've already close to close already 12 strategic negotiations and as far as revenue synergies are concerned we touched on a few of them before but teams are already working together starting from the lower end and even on the CS side we did use a clean team approach to prepare a very detailed commercial plan to be able to go out as soon as we close in selling more products and services to our customers in italy to begin with all in we expect to have synergies for about 100 million euro of cash for next year uh part of this is capex as you can imagine is one of the areas where it's easier to optimize and faster to optimize but we're progressing on all initiatives here i'm talking about 100 million euro of cash synergies in the year and therefore obviously the exit rate would be much higher than that. So let me now move to page 23. In short, we are basically simply confirming the guidance that we gave you last time when we talked for the first time about the new aggregated group. This is valid, obviously, for NEXE and NET. And I just remember that we did upgrade our guidance at quarter one results when we were talking about NEXE only. And we're now confirming all of this. 10%, about 10% revenue growth in the year, about 11% to 13% EBITDA growth with margin expansion, both versus 2020 and even more 2019. It was a more normal year, about 3 percentage points versus 2019. Broadly stable capital intensity ratio with anticipation of the M&A synergies. And last but not least, as Bernardo showed you, continued that. cash flow generation and progress in the leveraging over the long run, starting from a new level that is exactly in line with what the plan was, with what we did announce when we did sign the deals with SEER and NEXT. So page 24, I will not go through all of it again. The key messages for today, continued recovery and acceleration of volumes across all geographies, with clear signals of acceleration of cash to digital payments across, again, all geographies. Very strong financial performance with double digit revenue growth in the quarter and further margin expansion as well, and a particularly strong performance in merchant services and solutions. And last but not least, progressing according to our plan and marching ahead in putting the new group together as a combination of Nexinet and SIA. And last but not least, as I just said, we've confirmed the ambition for the full year. I'll stop there and open up for your questions.

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 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 Sebastian Stabowitz with Kepler-Chevreux. Please go ahead.

Yeah. Hello, everyone, and thanks for taking the question. So I know it is a bit too early to provide any precise indication for 2022, but just wondering, If you could help us to a little bit understand the dynamic behind your sales and your margins moving into 2022. We are seeing DASH or Nordics gradually recovering. Is it reasonable to assume a kind of acceleration of the trends moving into next year? And a second question would be more on a competitive landscape to understand a little bit what is happening in your main market, Italy. We discussed a couple of times competitive landscape, but on your new markets like Nordics or Dash, who do you see usually in those markets, and do you see any fast-growing acquirers in those markets moving from online to in-stores and trying to compete on the SMBs, or is it not already the case? Thank you.

Sebastian, thank you for the questions. Listen, 2022, we'll talk about guidance for 2022 in February. That's when we try to give you our view for the year. I think when we did announce this, we said that our ambition was to obviously increase the speed of growth of the company on a larger scale. and more resilient perimeter. Our previous pre-COVID, if you wish, guidance was 5% to 7% of revenues and I remember 13% to 16% of EBITDA. Our plan is to do obviously better than that on the back of the new context and the new group profile. Then every single region has its own dynamics. Clearly, we see it as we are preparing the budget, as you can imagine. We're actually having, in terms of volumes, good expectations from the Nordics. But then there are many other specific dynamics that have to do with specific contracts, specific areas of investment, so on and so forth. So I would really prefer to wait and give you a more detailed commentary when we come to February and within a broader picture. But I believe that what we are observing as we speak and the data that they show you in terms of specific individual sectors are confirming that we see growth potential in the Nordics as well on top of obviously Italy or Germany and obviously places like Poland or Central Eastern Europe. Listen, when it comes to the dynamics in the other markets, I think that in the other markets we are seeing a little bit of dynamics that I mentioned before. I mean, in the SME space, you see these new answers, but to be honest with you, it's really more a map. We don't see, for the moment, in our geographies, other players becoming more visible or more aggressive. So this is a competition that we know and is very much focused on new-to-cars segments. In the commerce space, you tend to see a little bit the same players around. I mean, the Stripes and the PayPals and the like, I would say, no major new dynamic there. Clearly, Stripe are making more inroads, smaller merchants on the back of the strong partnership that they have in Shopify, in the markets where Shopify is strong, but As I said before, now we're also strengthening our position through partnerships with the other content management systems and e-commerce enablers. And when it comes to LACA, I would say a bit more of the same of what I said before. So adding in more presence and in general international support Aquarius being present, but nothing really major. As you know, by now, Pilates is becoming a bigger phenomenon, and we're actually benefiting from that ourselves with rate pay. Klarna is becoming more active in the Nordics and, I would say, in Germany as well. You know, it's particularly successful in Sweden, where, honestly, we're not very exposed, as we've discussed in the past. When it comes to online players moving more in-store, in particular SMEs, to be honest with you, for the moment we don't see a lot of movement. You don't have yet any particularly successful case of other PSPs or account-to-account providers or by now operator providers in SMEs. SMEs space, which is actually, as you've seen, is the majority of our revenues in It remains a very, very specific space. It's very local. It's still very much connected with banks. It requires a lot of specific attention, and the more we segment, the more we arrive at that, because it's even more local somehow. So I would say nothing really new from that angle.

Thank you, Paolo.

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

Yeah, good afternoon. Thank you very much. Just looking into the fourth quarter, firstly, I mean, you've reiterated clearly the guidance for the year, 10% growth. I mean, previously specified an H2 growth to get there, I think it was 11% to 13%. And obviously, we can sort of do the calculation around Q4. But I guess my question is, is it fair to expect an acceleration perhaps across all your geographies into Q4? I mean, we've got a weaker comparative base, I think, in in the Italian business, including the progressive reopening across the Nordics, but particularly DAC, given the travel exposure that you have there. That's the first question. And then maybe to sort of follow up on the EBITDA, the quarter and for the outlook uh can you make a comment just on i mean we can see the revenue i suppose more or less for next year net for the quarter but can you just make a comment on the ebitda performance between next year next for the quarter and as we um you know look out to the full year there i mean you're sort of in the mid middle of your 11 to 13 range at the moment but depending on what you say about revenues for q4 Is there any reason to expect EBITDA not to sort of grow similar to revenues in the fourth quarter? Thank you.

Hi, James. Did you follow Bernardo?

Yeah, sure. So the question on the fourth quarter is, and I would say it's a difference between our guidance and where we are on the third quarter. So as you said, the math is pretty easy. What we can say is that we expect the fourth quarter revenue growth to accelerate compared to the third quarter, and this is primarily driven by merchant services performance, which we expect to be strong in the fourth quarter and stronger, if you want, than the third quarter. Overall, for the year, though, I would take what Paolo said with regards to overall guidance, which is to grow revenues double-digit. The second question you asked was on EBITDA growth for Nexin Nets, is that right?

Yeah, just in the quarter, EBITDA between the two businesses and the relationship in the fourth quarter between revenue and EBITDA.

Yeah, so in the third quarter, the EBITDA, as I said, when we discussed the margin accretion came primarily from the growth that at NETS, right, where we had a significant step up from second quarter to third quarter, 19% growth in EBITDA. I think that's what we would like to stick to for now in the fourth quarter EBITDA performance. Having said that, we've confirmed guidance where you have a guidance for EBITDA growth as well. Great, thank you.

The next question is from Stefan Uri with Odo. Please go ahead.

Yes, good afternoon. First of all, I'd like to ask an update maybe on the CI process, if you have any view on when you will start to consolidate the CI into the group. And the second question is also regarding Italy, where you said that there was a 20% to 25% growth. Do you see this trend continuing into 2020? And if you expect a kind of help plan from the Italian government to push further this penetration? Thank you.

Thank you for the question.

Let me take the second one and then I will ask Bernardo to cover the first one and give you more details to what I've already done. I think we are very happy with what you're seeing in Italy in terms of growth of volumes in particular on Italian cars. We expect this actually to continue into into next year, even if the comparisons become more and more difficult. The reality is that today you still have a little bit of limitations here and there, but honestly, even we project the fourth quarter this year, we expect to continue to see a bit of further recovery and potentially, therefore, volume acceleration. But we remain quite optimistic. quite optimistic on the outlook, taking into consideration the fact that even if most of the activities are now open, you still have some kind of complexities for some of these activities. Government initiatives, I think, as we've commented in the past, we believe every government will continue to support digital payments because of the many, many positive contributions that it gives to society, the economy, taxation, transparency, and so on and so forth. This government has decided not to basically stop the cashback. That was the most visible initiative and because basically it was not convinced on some of the mechanics and it's obviously fine. As we said in the past, our plans, our expectations are not driven by that. We always said the cash flow was a very good initiative, a nice initiative, but now basically changing the shape of our profile. The good thing is that this government has actually decided and implemented two more to newer initiatives that are more on the merchant side and therefore they're incentivizing the merchants to basically upgrade their shop equipment and the terminals basically and at the same time basically for one year they're also supporting new to come merchants in terms of giving them the possibility to deduct from their taxes the commissions that they pay so changing direction on cashback but actually a confirmed belief of the importance of supporting digital payments through, I would say, the merchant side, and we are happily cooperating with as much as we can with the government institutions, but broadly in implementing all of this and continuously provide further ideas and opportunities

In terms of the process, there's a bullet point on slide 20, where are we? We're expecting Bafin approval anytime soon. It's a pretty, I would say, administrative process here. There's actually a typo in the presentation. Danish investment authorities have approved the transaction, and then we will need to have the prospectus with the pro forma numbers approved by the Italian Stock Exchange Regulator, similarly to what we did with And that should happen again somewhere in mid-December. So we now have, I'd say, deal certainty given that antitrust approval, which was the one where most of the work needed to be done, has been obtained. And we're looking to close at midnight of the 31st of December. That means, going back to your question, we will be consolidating from the 1st of January next year, so we'll have a full year of consolidated numbers for SIA, and we will obviously, as part of this, provide you with comparison numbers for 2021, which includes SIA and NETS as if we had bought it from the 1st of January. of this year. So you will have a same perimeter and the same will go with the database that Stefania puts on the website. This, by the way, is also true for the Ubi book acquisition which closed on the 26th of October but has retroactive effects from the 1st of January. And the same will happen when we close the Alpha Bank deal, which will be in the second quarter next year. So we will always strive to make sure you have a meaningful like-for-like comparison in the same perimeter. But the closing of SIA is midnight this year. So from 1st of January next year, you have the consolidated numbers in the actual accounts.

Okay, thank you. I have a quick follow-up on Germany. Did you see any weakness in Q3 recently? compared to what you were expecting? And are you concerned about the rise in number of COVID case that could probably or potentially have some impact on your fourth quarter? Thank you.

Well, I think in Germany, we see super strong, as you understood, e-commerce in particular, I'd say, and in other areas as well. In terms of COVID, yes. I mean, you're right on the fact that in the third quarter, there were still restrictions in Germany more than in the other geographies. There is an index that is actually called the Restringency Index that is quite telling from this point of view. And Germany was across Europe. The country was still restrictions. And I was there two weeks ago, and you could really feel it. I was there with Bernardo. You could really feel it. from the smaller things in hotels to the more visible ones. And this is actually, as we said before, affecting in particular the locker sector, the larger merchants where we have, as I said, still an important exposure to the travel industry. And I would say there are two angles that are particularly relevant that are kind of intersecting between international travelers coming in and business travel more broadly. And as you can imagine, while in places like Italy, you have a huge amount of inbound from tourists. So international travel being tourism in the summer, don't have that many people going to Germany to enjoy the summer. It's actually the other way around. So the traffic there is much more business related and this is still suffering. But again, said that, we see We've seen a good recovery also there. Listen, on what is happening these days, it's difficult to comment, honestly. I think that we need to understand exactly what will happen in terms of measures. I was reading before coming the new news, before coming into this call, about cases growing again, but at the same time, the measures that we're thinking about implementing were not really comparable to real organs and stuff like that. I think we're talking about asking the Green Pass Commission to enter in certain places like restaurants or clubs and stuff like that, which is something that in Italy is already happening. So let's see. I think it's really too early to say. I think the good news is that more or less the percentage of people with vaccines are now high and therefore the case is increasing the impact on the other the people is more limited and therefore hopefully the need for restrictions.

Thank you very much.

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

Yes, thanks for letting me on. A couple of questions also from my side. Maybe on the partnership strategy, with ISV maybe you can talk a little bit about the economics there and then also is there geographic kind of statistics around what is currently served by those partners especially then maybe also breaking down between in-store and online and then maybe you can give some more color on e-commerce growth for the group you have stated here e-commerce revenue growth but it would be helpful to understand also the the transaction volume growth. And then just in general, did you see throughout the quarter as it developed some shift between in-store and e-commerce? That's the data.

Hi, Anis. Thank you for your questions. So let me start from the first one in here. Maybe we can follow up more precisely. I think in general, as I said, that these partnerships are happening, I would say, in every single geography, and probably they're actually a bit more new to Italy, even if we are very active, are happening with two types of players. The ones that are, and it really depends on the geography, and let me give you, in case it's probably a more closer one. If you take, in Italy, you have two types of players. You have the ones that are coming from the ERP systems, CRM systems and they are keen to integrate payments and they are active across merchants from all possible industries. Sometimes they have products that are more specialized for certain industries and we have been partnering with the two super super key ones. At the same time, you have a bit more developments with the ones that we call vertical ones. I don't know, I'll give you an example. Pharmacom that is serving pharmacies, just to mention one of them. But we're really talking about, I mean, in Italy, talking about statistics, we have 48 of these partnerships today. Denmark more than 100, Sweden more than 100, Norway almost 100, Finland more than 100, Germany more than 100, and so on and so forth. So there are many, many of those. And economics vary a lot depending on what is the relationship. Sometimes these punishments are more technical integration, so there is not a very specific economic punishment. In some other cases, like the one I was mentioning before, instead you have a go-to-market initiative. You invest together, you go to market together. and you share the benefit together. So very, very different situations, but also evolving in an important way. As far as maybe on e-commerce volume and revenue growth, you can comment, Bernardo. On the shift, this is a bit more qualitative question, but it's a very important question. To be honest with you, over the last, I would say, few quarters, We have not seen any further acceleration of e-commerce in terms of people moving even more from physical to e-commerce. If anything, you had that in some sectors the opposite direction and therefore people have been keen to go out and shop again in the physical world, I guess. obviously because our stores are open again, but more in general people being keen to go out and socialize and buy and eat in real places. I think that the trend to more e-commerce remains there, but it's interesting because some of the acceleration that we've seen COVID started in the first period of COVID and now is slowing down a bit in certain cases, reverting a little bit. But again, in general, the trend will continue. But Al, you want to comment on e-commerce?

Yeah, sure. I mean, we saw that revenues grow in the third quarter, grew 36%, 37%, if I remember correctly from the slide you had in the document. Volume growth was actually approximately 13%. You see it on slide 10 of the document. Within this, clearly, SMEs are growing. LACA suffers from the fact that LACA has an e-commerce component, including travel high impact, which has caused it actually to shrink in the quarter. So if you look at LACA without the high impact, it's actually growing 9%. Overall, e-commerce volumes in this set are growing 13%, and it's a mix of both. Okay, so it's about $25 billion.

e-commerce volumes in Q3? For the group. Okay. Thank you.

The next question is from Sandeep Deshpande with JP Morgan. Please go ahead.

Thanks for letting me on. I didn't hear all the questions, so please excuse me if some of this was asked before. In your Nordics or in your overall business, you're saying that the LACA accounts are lagging behind the recovery compared to the SME accounts. We have seen quite a different effect at players like Adyen. Maybe you can explain why Nexi is different in this regard as such, really? And then secondly, is there an explanation why you think that the DAC regions are lagging so much behind in terms of the recovery in terms of the volumes and thus the revenues as such?

Thank you. Thank you for the questions. On LACA, the dynamic that we are observing is very much driven by the industry mix and it's very, very clear. I mean, if you make it from the high impact sectors like airlines to use a typical example or travel agencies and so on and so forth, the overall volumes are growing 9% compared to pre-COVID levels. actually even more so in places like Italy. And, of course, you have growth coming back despite the fact that there are still some restrictions around. I think that the different dynamics that you observe with ADIEN is probably driven by two elements. Number one is that they are less exposed to travel sectors, I think, more broadly. And number two, you should also consider the fact that they are actually entering new markets and expanding further. If you are pointing precisely on the relative dynamics with a player like them, I go back to what I said before. Clearly, Arjen is a very strong player that we immensely respect, to be very, very clear. We continue to see them successful. when they play on a global merchant with global CRM systems integrated with a lot of online and more limited in store. And we continue to be successful also against them. Now instead you have a more local regional merchants, more local integrated that require local assistance and require more specialized solutions and more customized solutions and so on and so forth. When it comes out to DACA, DACA is two elements that explain the dynamic there and I think it's very visible when you go at page 8 of the presentation where you have the volumes for DAC by microsector and as you can see there on the one side there is a mixed effect and the mixed effect has to do with the fact that NETS not Germany per se but NETS was more exposed and still more exposed in terms of mix of sectors to the high impact sectors in terms of volumes to travel and airlines in particular. This exposure has been diminished over time but still is a relatively high exposure and therefore there's a mixed effect in Germany. When you look at the other sectors instead, you see a very strong performance in the basic consumption growing anywhere around 30, 30% plus versus 2019 and also the more discretionary products and services sectors coming back to growth. And at page 9 on the right, you see some very visible examples of sectors growing double-digit in that space as well. So I would say it's more driven by the exposure to travel in the mix.

I'd say also, Paolo, the Italian SMEs were underpenetrated. I think there's a structural underpenetration there, which we're now closing the gap. Thank you.

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

Yes, good afternoon. Hi, Paolo. Hi, Bernardo. I had a couple as well. So firstly, just coming back to sort of the progression in the back end of the year, given the easy comparisons, and I think you've kind of grown broadly, broad-based across both Cornexi and Cornet's. you know, is the kind of essentially your guidance being perhaps a bit more prudent or constructive? And if so, what is the kind of thinking behind that prudence? And then secondly, a question around, again, on sort of competition. And here, I just want to nuance it a bit more in that there's clearly an appetite for larger merchants to take kind of more traditional omnichannel. But we also see the likes of sort of Adyen and moving in with a kind of platform approach to address the longer tail of the mid-market. Now, what's your sort of strategy to sort of compete against that? And if I kind of nuance that further, you know, the Nordics is a fairly well-penetrated market. And, you know, we have, you know, a number of kind of digital first players there. So what's your sort of strategy to perhaps defend your position or even kind of grow your business there? And then the last one for Bernardo, when we look at the EBITDA performance, this was quite strong. In terms of the synergy realization at NET, it seemed like those mid-teens type cost savings. Could you give us a bit more color around where those savings came from? And as we go forward, what's the path and what are the levers in terms of the synergies that you expect to extract to hit the milestones for the the next kind of payout to be achieved. Thank you.

Hi, Moen. Thank you for the three questions. I will cover the second and then I will hand over to Berard. This is a very good question. Let me try to be explicit here. First of all, LACA, as you understood for the group, is about 5%, a bit less than 10% of total revenues. It's about 9%. on total merchant services about half or 60%. So we're talking about more or less 5% of total earnings to begin with. Nevertheless, we believe it's actually an opportunity for the new Nexi in particular. And to be clear, the competition from players like Adyen is there. As I said before, they are very good. They're more focused on certain markets than others. And I'm sure they will try to move a bit more into markets on smaller players. At the same time, I think the good news is that in those markets, the markets we're representing are very international, and we're actually investing to build stronger in the camp of omnichannel products and services, omnichannel integration, analytics capabilities, and that would continue. So you will see a nice competitive dynamic where they will probably try to do it and we will defend our turf from the back of being local but also scaled up and for being able to invest in new products and services. At the end of the day, if you wish, each one of the two of us is strong and weak at the same time based on our strategies in the sense that the key strength of places like Adyen is the one platform theme that has many positives, but also a lot of limitations when you have to start playing with smaller players, more complex players, more integrated players, merchants that don't have integrated CRMs, that are less sophisticated, that require a lot of local care, and so on and so forth. Our position is the other way around. It's true, we are a more complex team. in terms of technology setup and plus and so on and so forth. But at the end of the day, it makes us quite effective in serving the local needs, in being closer to the customers, being able to integrate effectively with their needs. And for example, segmenting by industry more effectively for what is relevant locally. So I think we continue to see this dynamic and each one of the two of us will do its best. I think the good news is that in many cases, the market is growing. No, I'm sure that with space for players like Alian, with space for players like us, and customers will choose depending on what is the prevailing need that they have. Bernardo, just a third?

Yeah, so I think we're going back to also, I think James asked a similar question earlier on, so I can only go back to what we said earlier. We expect the fourth quarter to be better than the third quarter in terms of top-line growth, and I think with regards to the The degree of prudence in this, we won't comment on that. Our guidance is our guidance. We're committed to deliver it. Hopefully, we'll do better, but that's what I'm prepared to say on that front. With regard to NETs, as I mentioned earlier, the EBITDA growth in the third quarter for NETs was 19%, 18.8%, if I remember correctly, and 19% compared to 2020. I expect that to improve in the fourth quarter of this year. I think that's also implicit in what we had said some time ago, how we were aiming to hit an EBITDA for Nets, which lies within the earn-out range for Nets. It was agreed with the sellers back at the end of last year. So, this growth in EBITDA, which is obviously fueled by top-line growth, is also aided by the realization of synergies within NETS. And I think that was your question, Mo, because synergies coming from the NEXI NETS integration, well, those this year are, I'd say, in total, approximately 10 million euros, mostly CAPEX. A small portion of that will be in our fourth quarter numbers. And with regards to next year, Paolo has already said we're targeting 100 million euros of cash synergies from the three entities approximately. I'd say 60% of that will be P&L synergies and the rest will be CAPEX synergies. Okay, Bruno.

Thank you.

The next question is from Alberto Villa with Intermontesim. Please go ahead.

Hi, good afternoon. Thank you for the presentation. I have just one question. It's on the buy now, pay later business. Can you give us some color on the revenues you are generating in this unit, the growth you are expecting, and if you have any thoughts on the strategy on this segment going forward, if you want to expand it or to exit, or what's your thoughts on this? on the opportunity there. Thank you very much.

Alberto, so our strategy in this space is, at the end of the day, twofold. We are happy to have this asset that is called RedPay, just to be explicit, this is operating at the moment in Germany, in Germany only, with potential to expand elsewhere at some point. By now, it is focused on the merchant side. They don't have a consumer-facing strategy like the Clarnas. They really partner with the merchants. They normally white-label and afford really the best possible partner for merchants. That's where they are successful. The business is growing very rapidly. Depending on the quarter, it's anywhere between 50% and 100%. I think last quarter it was about 70%, 75%. and it's become a sizeable business. We don't provide the details of this, but it's getting bigger and bigger. So we're talking about tens and tens and tens of millions of euros per quarter now. So this is one side of the strategy. At the same time, we also recognize the fact that if you have as your core e-commerce strategy, the one of providing a great acceptance to merchants, you all have to be able to provide the relevant, the locally relevant buy now, pay later methods together with other alternative payment methods. And therefore, in our geographies, we're also offering more and more the possibility to use other by now, political methods that we partner with. And I believe this will continue to be the way forward. Now, clearly, the other way around works as well. And therefore, a company like Rete, because it's technically a company, is also partnering with other PSPs. in Germany. They're used by the Agions, the WorkPays, the BSP1s, the CompuTops, and you name one. So at the moment, we have these two parallel strategies. It is very, very, very clear that going forward, we'll continue to partner with more and more of them, and we are happy owners of this fast-growing and sizable buy-now-operator asset. Okay, thank you.

Thank you, Alberto.

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

Hi, thank you for taking my questions. Just three questions from my end. I think, firstly, when I look at your NETS figures on the presentation, That excludes volumes from Dancourt. So it'd be helpful if you maybe give us some color over how kind of the volumes looked, including these figures, and if they differ materially, I guess, from what you presented. The other thing that I'd also be interested in hearing as well is on the Jira card side, I appreciate the minority of your volumes in Germany, but how have the volumes on the Jira card side trended, where historically I think you guys have been actually a share gainer in that market, admittedly off of a relatively low base. And then I guess the final question is a little bit bigger picture. But when we start thinking about capital allocation of the combined entity, I mean, you guys will be able to deliver the business relatively rapidly at the current pace. I mean, is there any kind of updated thoughts you have around potential M&A, whether that switches maybe more towards e-comm, maybe looking at assets, for example, like a CompuTop in Germany to maybe strengthen your presence in e-comm? Thanks.

Hi, Paul. A good mix of detailed questions and super strategic ones as well. That's great. Listen, on the first two, I think we'll come back to you with a bit more detail if it's important to you. I think in general, and I focus on the second one, on gyrocarrier, we are clearly challenges in that space. And therefore, we want to grow in that space. And I forget that Concordes is coming from a position where they were mainly acquirers for international schemes, a little bit like what Carta C was in Italy back five years ago, six years ago. And from there, they moved over the last year or two into offering the full package. So the terminal and basically acquiring across all schemes, including Girocard. So I don't have the numbers, but clearly that's a space for... development. On Dancort, I think we'll come back to you because we don't have a precise answer. More broadly, instead of capital allocation, coming to the very strategic question, listen, our focus today is really, really, really on getting the three companies together, delivering the synergies, and most importantly, building a stronger and stronger and stronger company for our customers, our people, and our shareholders. Along the way, as we always said, we will continue to consider opportunities, but it's our duty somehow, but we really, really focus on the ones that make absolute sense For us, I think what we've done with Ubi or Alphabank is very clear. We've been looking at other stuff we didn't do for very good reasons, but it was our duty to look at it. And I think we'll continue to do so going forward. As you can imagine, we cannot talk about specific cases. Taking into account the fact that as we leverage and we divest, we potentially divest also assets that are not core and so on and so forth, we also consider putting more investments, more organic investments, because there is always this feeling that M&A is easier than massive organic investments. Actually, given where we are as a company, given how much we are keen to invest in geography such as Germany or in spaces such as e-commerce, that is also another important area of investment. So I believe you will see a portfolio of those, but really our focus today is to deliver in what we have already committed to you. Bernardo is trying to give you an answer on what? It's probably best if we come back to you. Okay, let us come back to you before we give you an answer that is not reliable.

That's really fair. Thank you very much. Just maybe one quick follow up is on the divestment of non-core assets. I mean, how should we start thinking of that? Is that part of a regular portfolio review that you would do on an annual basis? Or are we just talking more about concessions that would come as a result of antitrust?

No, no, no, no, no. I want to be very clear. Actually, thank you for giving me the opportunity to clarify this. On the antitrust thing, we would like to do, because it's a request by the antitrust, but again, it's about a business that is 6 million euros of revenues, probably 2 or 3 will be declining revenues because it's a legacy business, checks and the likes. So, that has nothing to do with the investment strategy. I don't even know how much that is worth, we are doing our own work, but we're really talking about a very, very small thing. Instead, what is very much right is the first of the two things you said, that is an ongoing and regular strategic review of our portfolio of assets to make sure that we put our resources and focus and energy on what is strategic for our future. And instead, we let the other assets to be owned by better owners than us for whom we They are strategic. Never forget as a benchmark that before doing, even before the company was listed actually, we did do a 506 M&A deal where we bought stuff. We did do 12 where we sold stuff. So we like to clean as much as possible the portfolio and focus and we continue to do it. And some of these businesses, we love them. We would love to continue to have them, but actually it doesn't make sense for them and for us. So I think it's very rational. I think we always need to be very rigorous. We continue to be very rigorous. I mean, look at what, for example, also Netze has done when they sold... the corporate services and instant client services to MasterCard. By the way, it's a very interesting and attractive evaluation. And we'll continue to do so. I think it's good discipline. We'll try to give you an update on this, ideally in February, together with the outlook for the new year. That's really clear.

Thank you very much.

The next question is from Alexandre Four with Exxon PMP Paribas. Please go ahead.

Hi, good afternoon. Thanks for squeezing me in. I had a couple of questions. One is going back on your sort of own alternative payment methods, be it account-to-account in Poland or rate-based in Germany. I was wondering if you could go back on the economic service payment methods and whether they're accretive to your take rate, for instance. And as a side question to that, I was wondering... If you view them as differentiating factors to win wallet shares with a given account, have you found yourself in a position where you went to a merchant to sell on the rate pay and you ended up selling a much wider range of services? That'd be my first two-part question. Second question is on Italy this time. I think you mentioned in the past that there's quite a bit of appetite to move to digital payment in Italy, at least on the consumer side. I was wondering if you have your own initiatives to perhaps lower acceptance costs for merchants and accompany this transition to digital, new pricing plans, low cost terminals, any specific initiatives you're pushing as we go into 2022.

Thank you. Hi, Alessandro. So I understand APMs are both economics and strategy and Italy, if we're doing anything, in that lower cost for merchants. Well, listen, let me start from the second one around Italy. I think the good news for merchants, actually, is that prices are structurally going down in our sector. It's absolutely normal because when volumes go up, unitary prices go down. It's almost a law of economics. Unless you have monopolies or duopolies, which is not the case in our industry, that is very competitive here. The good news is that the combination of volume growth and unitary prices going down is positive. And on top of it, you also have a value-added service. So prices tend to go down. as has always happened. If you like, the one thing that we are doing more proactively, and this is driven by competitive dynamics, is also to design propositions for the merchants that are newer to these products and services, not the typical new-to-card segment. We are offering a nice entry level, almost try and buy type of situations we believe is important. although it is not necessarily on the rates because a customer that is new to cards doesn't know how much they will use. So for them, the barrier to entry is more the terminal and that's where we have launched as well the mobile post terminal that doesn't have a fixed rate per month but is basically a small one after depending on the campaign and so on and so forth is normally below 50 euros, 49 euros but again with a higher merchant feed and then we upgrade the merchant to a proposition that is more suited for higher volumes. When it comes instead on the APM methods and so on and so forth, let me try to give you the overview and then Bernardo can help me and comment a bit better. First of all, economics. Clearly, the economics are very different if you're talking about APMs that you own or APMs that you distribute and you partner with. We should distinguish in between account-to-account and buy-now-pay-later for the ones that you own. Buy-now-pay-later has an amazing growth. Profitability-wise is actually lower because obviously it comes with a certain cost of risk. It is very much under control, but it's actually And by the way, in this specific case, RatePay is also investing in growth, as well as every other player in the industry. I'm sure you've seen the numbers from some of these players, and they are quite explicit about it. Actually, RatePay is profitable. This is good news, but keep on investing in growth. Account to account is normally more profitable. There is a cost to develop the ecosystem because it's a two-sided business model. You have to sell it to the consumer and sell it to the merchant. Once this ecosystem is developed normally, it comes with nice variable margins. Instead, when you distribute, you can really have any type of deal, to be honest with you. The more you are the one facing the customer and distributing to the customer, the better the economics are. If it is just a technical integration, then your economics are much lighter. But actually, for some of them, the economics are quite comparable with the ones that we have on cards, to be clear. I cannot give you a specific example because I could, but I cannot in terms of disclosure, but I have in mind at least a couple of examples where the economics are exactly one in Italy and one in another place where the economics are basically the same that we have on cards. I'm not sure I understand exactly your question because the communication was not very clean. But if your question is how do you guys balance on the strategy when I have a strong APM, do I give it to everybody to expand it or do I monetize it by differentiating myself on the acceptance side? I think that's a very, very, very relevant strategic question. that does not have one answer that is always the same by product and by market because it really depends on the specific market dynamics. But again, if I use the example I said before on buy now, pay later, it's quite clear. Rate pay is a buy now, pay later acceptance method on basically every e-commerce merchant platform. sorry, e-commerce acquirer, e-commerce PSP in Germany. Why? Because we have a lower market share. And therefore, if you were leaving it only to us, it would be too much of a restriction for the full potential of the product. Maybe in another market with a different starting competitive position on market shares, you go in a different direction.

On the margin, yeah. So I think we need to distinguish, as Paolo did, between account-to-account and BNPL. Starting with BNPL, we should really think of it as a different product, a different business. So in terms of the margin accretion or the take rate accretion, it really depends where you cut the P&L because there is a cost-to-risk element there that you have in BNPL but not in account-to-account. So take rates would be higher, but then if you go to the very bottom line right now, obviously, as you've seen in some of the other larger listed also players in the BNPL space, you have the cost of risk element that you need to take into account. Whereas account to account, I think in terms of the top line, you should think of it as being priced in the various geographies in which it's present, more similar to domestic rails, but depending on how lean or efficient they are, with the margin being similar to what a card acquirer could be in that same market. So in terms of the margins, it shouldn't be diluted.

Got it. Thank you. Thanks very much for all the call ahead.

The next question is from Simonetta Chiriotti with Mediobanca. Please go ahead.

Hi. Good afternoon. Just a quick question on synergies. During the presentation of the first half results, You mentioned the possibility of increasing synergies by 10% in the long term. Is it something that you are still considering possible? Thank you.

So, Simonetta, this is a short answer, yes. Good. Yes, absolutely. I mean, as we're defining better and better plans, that's the reason why last time we gave you This highlights that this time we're giving you our outlook for next year. We'll continue to do it. We'll continue to update the more we have visibility. To be honest with you, it also goes in phases in the sense that we had, obviously, when we did close the two deals, we had our own view that was outside in on the opportunities. Then as we're closing the deals, we do a first round of inside-out view of the opportunities in the long term, and then we go into the more year-by-year detailed plans. And so this is a little bit what is happening. We'll continue to keep you updated, but the short answer is yes.

Thank you.

The next question is from Antonin Bordrivid, HSBC. Please go ahead.

Hi, good afternoon everyone and thank you for taking my question, too, if I may. I would want to have your view on the current microeconomic environment, especially inflation. We see inflation coming in the US and certainly in Europe soon. So how do you see inflation impacting your revenue growth? I mean, your revenue is partly related to value of transaction. At the same time, inflation could decrease the number of transactions. So how do you see inflation on your revenue growth? My second question is about M&A. I understand that your focus will be to integrate the two acquisitions you did, but how do you consider evolutions of your model to address adjacent segments like business-to-business payments, for example? Thank you.

Hi, Anthony. Let me take the second one on M&A, and then I pass over to Bernardo, because I'm a poor engineer and economist, so I can probably give you a much more insightful, forward-looking answer. On M&A, I think here we will have to remain focused not only on what we do, but also what we consider, because also the screening... or engaging in processes has by itself an organizational cost and we are trying to stay as much focused as we can. I reiterate probably what I said in the past, the two key areas of focus for us where we engage and remain, our priorities remain at the end of the day merchant, first of all it's mainly merchant services. No, first one being merchant books, especially in the markets where we are already and on relationships that we already have, because for us it's important to follow our banks, their strategies and partner with them. And this is what we've done, for example, on Ubi, on Alphabank as well, and so on. And secondary is more broadly e-commerce, both in terms of geographies and also capabilities there. And if you wish as an extension to this, you could also consider this world of software that can be effectively integrated with payments. And this small example of Alderberg is a nice one. That does not mean that we go after many of those necessarily. We will base it very, very carefully, and we really want to understand it before. We do it also because, given the position we're in, market partnerships are also very good and therefore we want to learn more about the business. But clearly e-commerce, the channel and merchant books are for us the key areas. Bernardo?

On inflation, yes, well, thanks Paolo for the economist, but I'll give you my 10 cents worth. I don't believe Europe will definitely lag the U.S. and probably not have such a steep increase in inflation even though it's lingering. My view is that our business is actually geared to benefit from inflation. As you were saying, two-thirds of our revenues are volume-driven and most of that comes from the value of the transaction. Conversely, our cost base is predominantly fixed and obviously there may be some wage price inflation. Europe tends to be stickier or more resilient than the U.S. on that front, but that should give us some protection. But more importantly, we pay our processing costs on a per-transaction basis, so we'd have a nice spread between revenues growing because of volume growth thanks to inflation, and as you were suggesting, lower transaction numbers with lower processing costs. In addition, on the capital structure front, I mentioned it earlier, I think three-quarters of our capital base is, or our fixed income capital base is, effectively fixed rates, so any inflationary pressure should deflate the value of this debt, so beneficial to us. And in the very short term, I think it's $1.5 billion of our liabilities are indexed to Euribor, but Euribor is floored at zero, and therefore we have some absorption capacity in that built into our debt structure. So overall, net-net, my take is that we're net beneficiaries of any inflationary pressures.

Thank you.

As a reminder, if you wish to register for a question, please press star and one on your telephone. Mr. Bertolucci, there are no more questions registered at this time. Do you perhaps have any closing comments?

Well, thank you. I think that's a simple comment. Thank you for being with us. Thank you for the many important questions across numbers, outlook, and strategy as well. I think it's important to have always that at the core as well. Again, simple messages for us. Continue the volume recovery across all geographies. I think this is really important strategically, not just financially for us. Good strong financial performance across the board in revenues and margin as well. And last but not least, we continue to progress in the group coming together to have a stronger company for the future across the board. So thank you very much and looking forward to see many of you over the next few days and weeks and hopefully in person and it's great to see that some of the meetings will be in person again. Thank you very much. Enjoy the rest of the day.