NEXI S.P.A.

Good morning. This is the Coral School Conference Operator. Welcome and thank you for joining the NEXE first quarter 2024 presentation. 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 NEXE. Please go ahead, sir.

Good morning to everyone and welcome to next call for first quarter results 2024. As usual, I'm here with Bernardo Mingrone, Stefani Mantegazza who leads our investor relations activities, and a few colleagues from our team that may help us in case you have very specific questions. As usual, I will start by summarizing the key messages, then I will deep dive in a topic that is very strategic for us and that we understand attracts a lot of interest from our investors, the topic of payments and software integration. We then hand over to Bernardo that will cover results in more detail, and I will come back for final comments, and obviously then we will have time for your questions. Now, let me start with the key messages of today on page three. The first message is that we continue to consistently deliver on growth and also on margin expansion at the same time. In the quarter, our revenues did grow about 6% with merchant solutions at 6.8% and with e-commerce actually growing double digits today. This growth that is broadly in line with our own expectations has been supported by good volume dynamics in line with last quarter of last year, maybe slightly better. EBITDA growth has been at 8.6% in the quarter with a very strong EBITDA margin expansion of 112 basis points. Second key message, we continue to shape our company for future profitable growth. We are continuing to execute our growth strategy. Two specific topics we want to mention here. We're increasing day by day our focus on our payments and software integration strategy execution based on partnering with the best-in-class local SVs, and we will have a deeper dive On the topic and in parallel, we're obviously working on efficiency and profitability, accelerating the cost synergies and more broadly our efficiency initiatives also on the back of the integration of the group, and this will have more visible effects later in the year. Third, simple message, we continue to pursue a capital allocation to create value for our shareholders. We are starting actually today, this morning, the share buyback program that we have announced in early March. It's a 500 million euro share buyback program that will last for a maximum of 18 months. And as I said, it's starting today. Second key message, our net leverage in the quarter has been down to 2.8 times EBITDA. from 3.0 at the end of last year. Again, we consider this clear evidence of our ability to strongly generate cash at the organic level and therefore the leverage if we don't have better usage of capital Obviously, the impact of the buyback will happen later in the year, but for this quarter where there was no material M&A and no buyback effect, you see that the leverage went down 0.2 times in three months. Last but not least, we confirm as anticipated that the 1.3 billion euro maturities, debt maturities that expire in 24 and 25 will be fully paid down with existing cash. And actually, $220 million of that has been already reimbursed during the month of April. Overall, in this context, we want to confirm our guidance. That is, I remember to everyone, revenues growing mid-single-digit. EBITDA growing mid-wide single digit with an EBITDA expansion of at least 100 basis points and excess cash generation of at least 700 million euros. Now, before ending over to Bernardo for results, you remember that in the past we were covering volume details. This was an heritage of the COVID days. As I've anticipated a couple of times, we will not do this going forward. Obviously, Bernardo will comment and give you more color on volumes in the context of revenue growth. At the same time, in the past, we were also providing an overview of our progress on the various fronts of merchant services. We continue to do this, and it is actually the same page. You will find it into our attached documentation at the end of the presentation. This time, instead, we'd like to focus a bit more on a topic that is attracting a lot of attention. central topic in the conversations we're having with our investors and with all of you more broadly that is payment software integration. And here we want to provide you our point of view on the topic and most importantly summarize our strategy. And therefore, let me jump on page number four, starting with the way we look at this ecosystem. When you compare Europe versus the U.S., it's really, really important to observe the fact that The software and payment integration ecosystem in SMEs is much more fragmented and definitely very, very local. There are SME software market specific characteristics and there are European structural characteristics. Starting with the SME software market characteristics that you find summarized on the left of this chart. First of all, this is highly fragmented and extremely local. market, the market of software providers for SMEs. There are hundreds of players in each market, and by the way, they are normally different by market. Normally, the top 5 to 10 cover less than 20% of market share, and therefore, there is a long, long tail. Second point, in general, these software providers are are less developed in their propositions and are actually much smaller than what you find in the U.S. In fact, 90 percent of their propositions are still relying on standalone or likely integrated payments, and moving into integrated payments is more by obsession for the moment. And last but not least, the fact that we have smaller SMEs plus specific market characteristics basically create a lower unit economics for integrated payment solutions versus the US. Normally, how much can be charged to an SME for an integrated software and payment solution is normally half, or in any case, much lower than what you would find in the US, which makes these markets much more difficult for large players to be entered, and most importantly, much more difficult to be developed cross-border in Europe. At the same time, on the right, you can see a number of specific characteristics that are actually structural for Europe. First of all, you have very country-specific tax rules and fiscal infrastructure to be integrated. Second, when you look at it from the vertical standpoint, you find even more differences in terms of local regulations. Let me give you a simple example of the way you need to present allergies, food allergies, in a restaurant menu in Germany is completely different from the way you have to present them in Italy or in Switzerland, therefore creating further complexity on top of the more regular ones. Last but not least, when you look at the local regulations for highly integrated business models, they tend to be more difficult than what you have in other places, and therefore this makes models highly integrated, like the PayFax model, more difficult and expensive to be deployed. And these are the software market characteristics. On top of this, we should always remember that also the payment market is highly fragmented itself, with more than 150 local payment methods and more than 10 national debit schemes to be managed if you really want to be successful in the mass market process. of SMEs in the specific country. Therefore, the software SME market is even more fragmented and complex than the payments one. Now, for all these reasons, what we are seeing and what we are expecting as a consequence as well, but it's already happening, is that in Europe, this market will develop at a lower speed and with different dynamics and very local dynamics, I would add, versus what we've seen in the U.S. Now, our strategy in this context to make integrated payments an opportunity for us is based on two very simple pillars. The first one is that we want to be the partner of choice for local ISVs. We are the partner of choice already in most cases for local ISVs. We provide the next payment solutions to the localized V's relevant in the key verticals and then integrate bundle them with their software solutions. These integrated bundles are normally distributed by their own channels. We offer a number of flexible business models to these partners of all size and maturity. And this is very important given the fragmentation of the market and the very different nature of the players that we find in the different markets. Among these business models, we also have what we call a smart payback model for larger and more sophisticated ASVs. Again, it's more an exception rather than a rule, but it's a model that allows, on the one side, a simpler life, a more efficient life in terms of complexity management to the ASV, and on the other side, more efficiency. customer and experience control for Nexi. In this context, we have developed and already launched a digital integration platform that is enabling an integrated CRM across Nexi, the software partner and the merchant to allow, for example, for frictionless onboarding and therefore merchant and partner visualization. Last but not least, we are also launching a partner program to help these ISVs to be effective when they sell integrated solutions to the market. Again, the vast, vast majority of them, they don't have experience in payments, and it's in our best interest to help them to be effective in that space on the back of our solutions. And this is the first pillar. The second pillar goes in parallel to this. We very selectively bundle A very small number of best-in-class software solutions from our preferred local partners with our Nexi payment solutions, and we distribute them through our channels. Not all of them. Not all channels are good for selling integrated solutions, but over time, this will expand more and more. We are obviously starting with basic core solutions that work across most of the simple applications, starting with retail. and over time will expand into a few selected key verticals. When we are able to upsell to a merchant the bundle, normally we see an increase in terms of value of the merchant to us in terms of net revenues of about 50 to 100% depending on the specific situation. So these are the two strategic pillars that we are executing. In parallel to that, on top of that, we are also leveraging Order Burda for learning and development. This is a very specific investment we've done a couple of years ago. Order Burda, let me remind everybody, is a leading SME hospitality point-of-sale software provider in Germany that is fully owned by Nexi. We have developed with them an integrated payment software proposition that is distributed by Orderbird channels, but now also by Nexi channels. They are fully integrated on the digital platform I was mentioning before, and obviously we leverage Orderbird also to develop this platform and in general the capabilities that we have in payment software integration further and further. And obviously, even if it's not necessarily a plan today, we remain with the option to expanding order board into further verticals in Germany or into new markets or both. On page six, you'll find a few examples of things that are live today. Here, I just want to mention the fact that on pillar one, being the partnership of ISVs, we already have more than 500 partnerships already. over eight markets. Here the focus is coverage of the market with all the relevant applications and all the relevant solutions being available in the market. While in the second pillar, the rule of the game is more focus and selection. Here you see three examples of what we are doing in Denmark where we have selected three solutions from three key partners and we bound them and distribute them together with our own services. Let me now hand over to Bernardo for results. Thanks, Paolo.

Good morning. As Paolo has already mentioned, we had a reasonably good start to the year with revenues growing 6%. EBITDA is growing just south of 9%, and this allows us to increase our EBITDA margin by just north of 100 basis points. Within the overall group revenue growth, we can see that Merchant Solutions contributed 6.8% in terms of its top-line growth, and this was and continues to be sustained by international scheme volumes, which you can see grew 8.3% in the quarter. This international scheme volume growth, if you strip out the cash component, so cash component being the cash withdrawals, was actually growing healthily in the double-digit area in DAC and in Italy being in a very high single-digit area. Throughout Europe, we see continued growth in the crucially and ever-important SME segment, And more importantly, we point out how with e-commerce, we're growing revenues in e-commerce year-on-year, driven by both the volume growth in the market, but also customer acquisition, customer-based growth. We actually believe that we're growing substantially more than the market in e-commerce. If we move on to issuing solutions, I'm on slide 10. We have a very strong quarter, given also our expectations and guidance for the year with the growth, which is... 5.2%, again, driven by top-line growth, driven by international scheme volumes. Here we continue to call out the crucially important for us acceleration of international debit in Italy. We were well above the 6 million card mark in Italy at the beginning of this year, so continued strong growth there, and we continue to focus and succeed in upselling and cross-selling our value-added services to a customer base across Europe. I think it's fair and important to call out what we did last year, if you remember, in the second quarter, if I remember correctly. Last year, we called out how there's a one-off contribution coming from banking M&A, which flattered our performance somewhat in the second quarter last year. And this will obviously have an impact to our full-year performance this year. This is obviously all expected, and it's just a comp issue, an year-in-year comp issue. So that 5% is a strong start to the year, but you should bear in mind that comp for 2023 It gets worse as we move forward in 2024. We move on to DBS. DBS had, I would say, a very strong start to the year with this growth of 4.3% coming from volumes in the clearing space, so a number of bank transfers increasing double-digit in the year, but also project work coming in probably from a phasing perspective a little earlier than expected, but very good performance from DBS as well in the first quarter. If we look at the split geographically, you can see Italy and the growth in the top line in Italy, as I mentioned earlier, supported by volumes and international schemes. If you look at the Nordics, the truth is you should probably look at that top line growth in the low single-digit area being split in two, one on acquiring where growth is more like mid-single-digit and on issuing where we have the runoff of some legacy contracts, not really in issuing but more in the account-to-account space or in the DBS space. also tied to past M&A with MasterCard and the current sale of Nordic DBS business. Back in Poland, I would say, you know, very, very, very strong performance in Poland and Germany. We spoke of the volumes in Germany in the emerging solutions part. And with regards to Southeastern Europe, I would only call out that Greece is performing well. But in general, I would say that Southeastern Europe is performing in line with expectations. Moving on to costs on slide 13, we have growth in the quarter, which is very similar to the full year growth in costs. Last year, we have already spoken about the effect of inflation, wage drift, and, in fact, upward pressure on wages coming from renegotiations of collective agreements in Italy and outside of Italy. I would say that, and we mentioned that last year when we had a big one-off from Italy in the fourth quarter, but starting from the 1st of January this year, we were also taking a hit in Italy on the renegotiation of the contract, which on a year-on-year perspective actually increases cost, wages cost substantially at 6.2%, would be half of what it is if we hadn't had that three-year renegotiation hit us in the first quarter. On operating costs, I would highlight how I think we have our performance flattered a little in the quarter, so contrary to last year. on non-HR costs, we have a bit of a benefit coming from phasing of projects. And I just remind you that really our guidance for the year, whether it be revenues, EBITDA, cash, et cetera, is for the year and not for the quarter. But I'd say good start to the year there as well. Slide 14 probably mentioned how the strong cash generation in the quarter has afforded us to reduce leverage to 2.8 times. Clearly, the first quarter is one which benefits from the seasonality of tax payments, no M&A being completed in the quarter, and so on and so forth. And that has led us to reduce leverage to just below, to around 2.8 times. Just following quarter end, we paid down our NASA notes. This is as expected. We have highlighted how we had earmarked $1.3 billion of available cash to pay down debt in 2024 and 2025. We started doing so earlier. In April, we will continue for the rest of this year and next year as expected. And it will also highlight how rating agencies, and this is true after the call for the first quarter results, have actually been supportive with regards to the leverage profile and our cash generation ability. So from a net financial debt and net leverage position, it's a good quarter as well. Finally, before heading the floor back to Paul, as he mentioned, we kicked off our share buyback program this morning. 500 million in total. The 18-month time horizon is a maximum period. Clearly, the speed and pace of delivery of this buyback program will depend on market conditions, share price, and so on and so forth. But it's important to note that it started or will start actually in about half an hour when markets open. I'll hand the floor back to Paolo. Thanks.