Nexi Spa Azioni Ordinarie

Good morning. This is the course call conference operator. Welcome and thank you for joining the NEXE nine-month 2024 financial results 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, Chief Executive Officer of Nexi. Please go ahead, sir.

Thank you, and good morning to everyone. Welcome to the Nexi third quarter results call. As usual, I'm here with Bernardo Mingrone, our Deputy GM, and Stefania Mantegazza, who leads investor relations, and a few other members of our team that may help in case you have very specific questions. As usual, I will start giving you a little bit of the summary of the quarter. Then we will have a deep dive, as we've done over the last couple of calls. This time we have chosen the topic of merchant services growth drivers, and I will tell you later why. After that, I will hand over to Bernardo that will cover the results of the quarter more in detail. I will come back with closing remarks and obviously for the Q&A session later. to answer your questions. Now, let me start with the summary on page three. The three usual messages, continued delivery of growth and margin expansion. Year-to-date in 2024, in nine months, we did grow revenues of 5.6%, with merchant solutions revenues up 6.9% for the nine months. EBITDA is up 7.3% year-to-date with an 82 basis points EBITDA margin expansion. Here, I want to anticipate the fact that we expect to accelerate the EBITDA margin expansion in the fourth quarter, also supported by the effect of the efficiency initiatives that we've implemented during the first part of the year. Second, we continue to shape Nexi for future profitable growth. I just want to draw your attention on two topics. On the top line side, in merchant services, our growth will benefit from structural growth drivers, and we will also give a special focus to customer-based value growth acceleration based on advanced solutions and value-added services up and cross-selling. We will have a deep dive here. And second, in parallel, we continue to work on efficiency on a structural basis, on a continuous basis, also on the back of the cost synergies that we continue to extract from the group integration. And this is also a key element that we'll continue to support into next year and in the following years as well, our margin expansion as well as our cash generation acceleration. Third, we continue to create value for our shareholders. In the quarter, or actually up to date, year to date, we have reimbursed 700 million euros of our debt maturities with the cash that we already had. We confirm our plan to pay down maturities 24 and 25 with existing cash, as already said in the past. We have also in the quarter accelerated our alpha billion share buyback program. It was supposed to be an 18-month program. We decided to accelerate it and complete it in September. And by now, we have already canceled about 83 million of treasury shares. Third point, despite having accelerated the share buyback and having therefore the full impact of the share buyback investment, our leverage ratio is broadly stable at around 2.8. And last but not least, at the end of October, we have completed the disposal of our Nordic EID business. Overall, based on these results and what we see happening out there, we want to confirm the guidance for 2024. Revenue up mid-single digit. EBITDA margin expansions at at least 100 basis points. Excess cash more than 700 million euros. And we want to confirm this guidance despite a softer-than-expected macro environment. Now let me drive into the topic of Merchant Services Revenue Growth Drivers. Why did we choose this topic? We chose this topic basically for two reasons. First of all because we received many questions on this topic from investors and therefore we want to pick this opportunity to try and give a structured overview on the topic. But second also because we want to focus your attention on two or three topics in the space of customer value growth that we feel are normally undervalued. Overall, there are three structural long-term growth drivers, and then you can also have extraordinary events. Let me start with the structural long-term growth drivers. First of all, you have market volume growth. Market volume growth has as main driver the secular shift from cash to digital payments. This remains the stronger driver of the growth for the company, we believe, for the sector more broadly. We continue to see a shift that can be measured in about one to two percentage points of penetration increase on a yearly basis. Obviously, these can vary by market depending on the stage that they are in their own development, but we continue to see markets developing very close to percentage points per year, and we see these continuing for the very, very, very long term. On top of it, obviously, market volume growth is also influenced by market nominal consumer spending. This is something that we can do nothing with, nothing about. This is normally a low single-digit driver, but obviously it really depends on a market-by-market basis, and most importantly, it depends on the phase of the economy, on the phase of macro. The second important driver is customer-based growth. Here one element is the continued incremental penetration of digital payments adoption of merchants in the various economies. This is something that maybe is becoming less relevant in more developed digital economies like, for example, the Nordics, but actually this continues to be a supporting driver in other economies that are a little bit behind. in terms of digital payment penetration, such as, for example, Poland, Italy, Greece, Croatia, and so on and so forth. And therefore, it is still relevant and will remain relevant for some time. And obviously, on top of it, you have market share dynamics that have an influence on customer-based growth. And here, as we always said in the past, we normally take share where we are challenged, starting from a smaller position, while actually we defend our position and accept to sometimes also see a little bit of erosion in the markets where instead we are leaders. The third driver of growth, structural driver of growth for merchant services is customer value management, customer value growth. And this is an area where we want to spend a bit more time in the following pages. First of all, customer base mix has an impact here. And we see this as a positive contributor because of our focus on SMEs. We read a lot about other companies focusing on very large Ds and being proud about them and so on and so forth. The reality is that we believe that the sweet spot is where we are focused on, which is SMEs, where actually we see more growth and, in particular, more profitable growth with less complexity as well. A second structural driver has to do with the payment method mix and the cost dynamics of each one of these methods. And here, depending on the phase, depending on the market, this can be a contributor, a positive contributor, but also in some cases a drag where you are facing, for example, scheme cost increases. Obviously, you have competitive pricing dynamics that in a growing market normally are putting pressure on your growth. And then there are three levers, three growth drivers that that we believe are normally undervalued, where instead we want to focus your attention on, and they are pricing optimization initiatives, advanced solutions, up and cross-selling, and last but not least, value-added services upselling. Last but not least, you can also have extraordinary events that may impact growth trajectory in the short term, in the specific year, with no impact on the underlying structural growth. This can be project work that we do for our customers or contrary negotiations, wins or losses, mainly associated to banks and banks M&As. Normally, they happen every year and do not have a visible impact on yearly growth rates. However, when these discontinuities are particularly large, they can have impact on the growth rate of the specific business unit or geography, especially if you look at them on the quarterly view. Or, if they are particularly large, for example, Bank of EPM M&A effects next year, they may also have a visible impact on on the overall growth rate of the specific year, again, with no impact on the underlying structural growth of the business. Now, let me jump into the focus, the topic of customer value growth, and in particular, the three levers that I've mentioned before. Let me start with pricing optimization initiatives. And here, I anticipate that I may become a little bit operational for this type of course, but we really want to give you a practical sense on the way we run the business and what really creates value ultimately for our business and ultimately for our shareholders. Let's start with pricing optimization initiatives. Here we have two areas of continuous focus. First of all, customer-based management. Here we continuously optimize pricing on specific customer-based segments. We normally focus on low or negative profitability customers, but we also intervene on the back of adjustments to payment methods, cost increases, like, for example, the scheme prices increases, or as a mixed shift when the market shifts from a certain type of payment methods to other type of payment methods, as it happened, for example, over the last couple of years, of the back of, I would say, a reshuffling of the different sectors. And last but not least, we also adjust to competitive dynamics. A couple of examples here. In Switzerland, this year, we have been reviewing the pricing of low margin or negative margin in some cases, customer segments, and this has been contributing up plus 3% on merchant services and net revenue growth in the country. Or, more visibly, in the case of Greece, where this year we have adjusted to payment methods, cost increases and mixed changes that happened over the last couple of years, and in one shot, This has contributed, is actually contributing this year to the growth of Greece with a plus 15% merchant services revenues that obviously goes on top of volume growth in the other drivers. The second area of focus also has to do with the offers that we can obviously bring to our current customers but also to new customers. Here there are basically two fronts that we try to work on. The first one is simplified blended flat fees for national and international schemes, and the second one are the bundles where we try to combine in one proposition terminal acquiring and valued services. Both of these examples actually are quite important because they combine a higher margin for NAICSI in the vast majority of the cases, but also a higher customer satisfaction and a higher competitiveness for us in the market. Again, here are a couple of examples. Our SmartPay blended pricing that was launched in Germany last year is actually driving up to a plus 30% on merchant value. Or, for example, we recently launched our SmartPos integrated bundles in Finland, and this is already representing 70% of the front book in the country. If you combine everything in this non-pricing optimization initiative space, this can have a pretty material support to growth. It can be anywhere between one and two percentage points additional growth, and that's the reason why we're so focused and we continue to be so focused on this. Let me now move to the second of the three levers that we wanted to focus on, and this is the one of advanced solutions up and cross-selling. And here there are three areas of focus in this phase, and I think this will continue to be the three areas of focus for a long, long time. The first one is the one that we've already covered a couple of calls ago, and this is the one of the integration of software and payments into integrated commerce solutions. I will not spend more time on this one because we've covered the topic already. Here we continue to develop our partnerships. We are well above 500 partnerships in the space and more and more we start to sell ourselves bundles with payments and software from some of our very key partners. In the short term these will continue to have pretty limited impact not because we don't believe in it but simply because European market is much less mature than the US one for the many reasons that we've been covering in the past, but clearly in the longer term we see these growing in importance and that's the reason why we are so much focused on this topic. The second area that has been an area of focus for us for several years by now is the one on the up and cross-selling of e-commerce and omnichannel solutions. Here there are three fronts, the cross-selling of e-commerce and omnichannel solutions on our in-store physical commerce merchant segments. The second one is the upselling of more advanced e-commerce checkout acceptance solutions on legacy gateways or acquiring only customers as well. And last but not least, on all e-commerce customers, we continue to upsell new payment methods acceptance and this is something that normally is quite profitable for us. This is something that we see already in our numbers as in general e-commerce has a higher growth rate than physical commerce, and this will continue to have an important and growing impact on our structural growth as we strengthen our proposition, and most importantly, as we deploy them across our various markets. Last but not least, something that may sound a little bit more tactical, but it's still very important for us, especially in the short term, The upselling of advanced terminal solutions. Here again, three fronts. First of all, the cross-selling of terminals on acquiring-only merchants. In some geographies, we still have acquiring-only merchants from the past, and we focus a lot in upselling terminals into this base. Second, the upselling of next-generation terminals, for example, small posts, on customers that are on legacy terminals. And last but not least, the selling of additional acceptance devices and solutions that very often are software solutions for extended customer experience. Here, an easy example is the SoftBoss solution that we have sell on our larger and smaller customers as well for mobility acceptance solutions or, for example, for queue management solutions. This is something that is impactful in the short term. Over time, this will probably become less relevant as impact, but the good news is that in the meantime, the other two levers will grow and grow and grow in importance and impact. Let me close with the value of the services upselling in the following page here. There are many opportunities that we try to capture and that will become different over time, but we want to focus on two that are particularly important now. The first one is DCC and the second one is merchant financing. On DCC, you know very well what the dynamic currency conversion is. For a company like ours that is present in touristic geographies like Italy, Greece, Switzerland, Croatia, or in non-euro countries like, for example, some in the Nordics and in Poland, this is particularly relevant. And we're working to increase penetration. And this is something that can create value for us, but at the same time is also very important for merchants because it can help increasing their revenues from payments as well. Just to give you a sense of the importance of this, on the merchants that start having DCC active and promoting it actively to the customers, we can see a 15% to 20% merchant average value increase. This is maybe less strategic, but creates value short-term. For example, this year we see a material contribution in the Nordics. Second area that we want to bring your attention to is the one of merchant financing. And it's actually much more strategic and valuable long term. You know very well what merchant financing is. Here we're talking about working capital financing. I want to be clear, we integrate this proposition in our digital properties that normally customers use to interact with us. but actually we deploy this product, this proposition with partners that are specialized financial providers, and they are the ones bearing the funding and credit risk, so we don't get ourselves into this space. However, this is highly strategic for value creation, but also, and I would say almost most importantly for customer satisfaction and stickiness. This creates strong loyalty from customers. We already live, we went live in the in the year in the Nordics, in Germany, in Poland. We roll out in Italy and Switzerland into next year as well. And again here, just to give you a sense of it, this can increase customer value anywhere between 50 and 100% when they activate these plans. And the level of customer satisfaction is such that we see an NPS at 90%. or even more, which is quite extraordinary. And clearly, this is a good anticipation of customer loyalty and customer stickiness. Let me now hand over to Bernardo for results. Thanks, Paolo.

We'll go through the slides. You've seen the highlights at the beginning of Paolo's presentation with regards to the group's overall performance for the nine months. If we look on slide nine, how this breaks down between the third quarter performance and the nine-month performance in terms of revenues. They're broadly in line, a slight slowdown. We'd mentioned the challenging macro environment which continues throughout 2024, in particular a summer which, whereas volumes continue to grow, they are growing less than they did in 2023. We had a record year indeed in some of our key geographies in 2023 with regards to tourism, which obviously makes for the more difficult comp year on year. In this environment, however, I believe our business remains resilient, and as we have already noted, we have confirmed guidance for 2024, and performance in the third quarter is in line with this. Moving on to EBITDA, even there EBITDA, a slight slowdown. This is primarily driven by phasing we'll see on costs, and we can have a word on the outlook for the year on the cost base to understand how the margin accretion we expect to recover to that 100 basis points, which is within our guidance. Moving on to merchant solutions, I'd like to call out the fact that we continue to see sustained volume growth across the group. This is, as usual, driven primarily by international schemes, in particular in Italy, DAF, and Poland. However, we do see an impact on the total volumes coming from this shift from domestic schemes, national schemes, to international schemes, which somehow impact overall volumes for us. However, in terms of the core of our business, we continue to see strong growth in SMEs, and this is clearly important in countries like Italy, DAF, and Denmark, where we are significant players. Moving on to issuing. In issuing, I remember that we talked about one-off or more than one-off project-related work we had in 2023, which... provided us a slight boost to revenues in that quarter, and that skewed the first half year-on-year comparison in this quarter. The truth is we don't have much to report in terms of exceptionals. If not, maybe that some project work, which is always very difficult to call in terms of the monthly calendarization of it, probably was booked a little earlier in June and May of this year. impacting performance in the third quarter in terms of issuing. However, I think the more important part, all of this was expected, and as we called out, we did expect the second half of issuing to be slightly lower in terms of year growth than the first half. I think the key elements here in terms of structural performance on issuing is the continued success of international debit. In Italy, we have now reached $7.5 million in Cards, this is, for us, a very strong contributor to the top line given the revenues and the profitability associated with it. And we continue to make progress in terms of upselling and cross-selling our advanced digital issuing solutions, or what we call CVM. One of the things Paul was mentioning about merchant solutions that also applies to issuing across our client base. On DBS, and this is a slightly smaller business unit and clearly a few hundred thousands of euros of revenues associated to project work can make a bit of a difference in terms of year-on-year growth. We have an acceleration in the third quarter. I wouldn't read too much into this. I think the year has been a strong year for a business which is primarily infrastructural with close to 3% growth for the nine months, and we expect this to continue also for the early year, contributing to our performance in terms of the guidance I'd call out one of the best-performing businesses in DBS, which is EBA Clearing, our partnership with EBA, where we manage a significant portion of European instant payments transfers, which is one of the highest-growing businesses within the overall group, not only DBS, and is obviously supporting this growth. From a geographic standpoint, you see it on the slide. Thirteen, we have Italian performance broadly nine in the quarter with the rest of the nine months, a very slight acceleration, but, you know, same holds true for Nordic. Stack in Poland, I'd say primarily driven by the slight slowdown in the quarterly performance compared to the nine months is primarily driven by Poland, whereas in Southeastern Europe, we have some issuer processing slowdown in Greece, which has been a bit of a drag to the top line, but otherwise, again, all expected and all built into the guidance we've given. Moving on to costs, as expected, again, we have a slowdown in the year-on-year growth in HR costs. This, as you know, is the function of the cost reduction plan on HR, which we had discussed, the transformation costs, which we booked, and people started to leave during the course of the end of the first half of this year, and we see the benefit of it in the third quarter, and we'll see more and more of it going forward, including the fourth quarter in 2025. With regards to non-HR costs, You know, slight increase compared to the previous quarters. This is, again, more to do with invoicing. You know, very difficult for us to be 100% exact and precise also with regards to the project work expenses. The phasing of this, I think, intra-quarter or intra-year is less relevant than the full-year guidance. And as we had said in the first half call, we expected that 3.9% of total cost growth year-on-year start to come down. It has come down to 3.6%. I expect this to come down further in the fourth quarter and to help us deliver through this cost performance the EBITDA margin accretion that we've spoken of and the overall EBITDA growth that we have spoken of in our guidance. Moving on to slide 15, we look at our capital stack. I think Paolo's mentioned the key elements here. We have a broadly stable leverage, notwithstanding the fact that we have completed during the course of the of the third quarter, the 500 million euro share buyback, which we were speaking of. Overall, we have approximately 500 million of cash out in the quarter between taxes, restructuring charges, and then the buyback. Notwithstanding this, our net leverage is pretty flat. We have, as already mentioned, at the end of October, reimbursed the outstanding senior bonds after having reimbursed the nationals. In April, that makes it about approximately 700 million euros reimbursed of our total gross debt in the year to date. And we have another, I think, 60 million more maturities in December. And then we move on to 2025 to complete the 1.3 billion total reimbursement for 2024 and 2025. Another point to call out, I think it's for us an important sign of... appreciation for the work we're doing in terms of digitizing the economies in which we're operating with regards to payments. We have signed with EIB, the European Investment Bank, an important funding agreement, 220 million euros of financing in an eight-year term to fund our investment in the digital infrastructure we work on. And obviously, this is, you know, kind of a I'd say a rubber stamp of approval given the significant due diligence which AB goes through before lending to anyone, and in particular to a company like Nexi. So, that said, I would hand the floor back to Paolo for his closing remarks.

Thank you, Bernardo. Let me jump to page 17 just to confirm the guidance that we have given in early March, despite a softer than expected macro environment. So we confirm a mid-single-digit top-line growth and a mid-margin expansion of at least 100 basis points and excess cash growth. of more than 700 million euros and a net leverage that will decrease below 2.9 times EBITDA, including everything. And here you've seen that we're already at 2.8 and we have already completed and therefore factored in the full effects of the buyback and we don't see any new cash out for M&A in the latter part of the year. So let me just close where we've started. Continued top-line growth and margin expansion. The numbers have been covered by Bernardo already. We continue to work to shape Nexi for future profitable growth, and here we've been focusing on the drivers of structural growth for merchant services, trying to highlight the fact that customer value management is and will be more and more one of these drivers, and in parallel continue to drive structural efficiency improvements. And last but not least, creating value for our shareholders with the buyback completed and at the same time continuing to deliver as we go along. Let me stop here and open to your questions.

Thank you, sir. This is the 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. The first question comes from Justin Forsyth of UBS.

Thank you very much, Paulo Bernardo. Can you hear me well? Yes. Beautiful. Well, thank you very much for this. Really appreciate it. So I guess question number one here is, now that the share buyback is over, do you have any plans further plans specifically for capital returns that you can illuminate for us. So will we be seeing a dividend? Will we be seeing more share buyback? Or will we be proactively addressing any upcoming debt maturities? I mean, I guess you said that you're going to pay off the remaining 24 and 25 maturities with cash on balance sheet, but clearly there's some financing further out the curve, perhaps. Just curious how you're thinking about that. And further, have you earmarked the proceeds from that EID sale to anything? Second question is, I wanted to dive in. So I guess the international scheme growth, I take the point, it's higher take rate. It's what's driving revenue growth. So you should think about that in concert with the merchant services revenue growth we're seeing. However, I would think if you add international and domestic schemes together, you're going to get a pretty good view on the health of the consumer, which implies low single digit right now. Maybe you could talk to us a little bit about, one, whether that's the right read there, and, two, if it is, what is the driver there, and do you expect that to recover anytime soon, or what were trends exiting the quarter or, you know, thus far in October into November? Thank you.

Good morning, Justin, and thank you for the two questions. Listen, in terms of capital allocation going forward, there are two things I can say. Number one, we'll continue to follow trends the strategy and, if you like, the philosophy that we have highlighted into our last call. And therefore, first of all, we want to see our excess cash generation growing more and more and more. I think we're given a kind of longer-term target for 2026 of about a billion. That's actually what we are obsessed with and that we will work against. Then how we allocate that capital will follow, basically, the logic that we've seen. So we'll continue to leverage, having in mind that 2 to 2.5 times a bidda. We will continue to return capital to shareholders, either through buybacks or dividends, depending on where the share price is, and making a decision that is the most sensible for our shareholders and for value creation. Last but not least, we will continue to have M&A on the side, but we see little large investment opportunities while we will continue to basically rationalize our portfolio in DBS and therefore potentially selling bits and pieces of that business. And here, the EID sale that you mentioned is just a part of all of these and was already factored into our projections for the year. So this is the approach that we have in mind. We will talk about capital allocation, however, only in February. So when we come back at the end of February with our results for the quarter and the guidance of 2025, that's the moment when we'll give you our plans for capital allocation into the new year within the strategy that I've mentioned, obviously. It will depend on where share price is and where we believe the better opportunities for value creation will be at that stage. On your second question around international schemes and domestic schemes and dynamics and so on and so forth, I think you really made the point with a very nice, I think, structure. angle to it and the consumer angle to it. You're very much right that when you look at the consumer health, you should put together national schemes and international schemes. And here, therefore, the picture is a bit less healthy than what we see ourselves when we focus on international schemes. As we've said in the past, in general, national schemes are losing shares in most of the geographies, I would say almost in every geography where we are present, but also in the ones where we are not present, that's very visible, and this is happening for a number of reasons. However, if you look at our angle, normally we focus on international schemes because that's where on a net-net basis we tend to create more value. And therefore, this shift is something that is normally profitable to us.

Got it. Yeah. Okay. So I think I heard you right there in saying that it is just a little bit less healthy from the consumer side. Thank you very much.

Yeah, no, I think if you want to use a proper indicator for consumer spending dynamics and macro development, it's good to put the two of them together. If instead you want to understand our financials and project our growth, you probably want to focus on international schemes. Thank you very much. Cheers. Thank you. Ciao, Justin.

The next question is from Sebastian Stabowitz. of Kepler Chevro.

Yeah, hello everyone and thanks for taking my question. First of all, on the short-term market condition, we see macro getting a little bit weaker in some European countries. Could you please help us understand the kind of volume growth you are experiencing since the start of the quarter in your main market have you seen any kind of slowdown or is it still going in line with the q3 trends and the second one is a little bit more near term on 2025 is a bit too early to answer precisely but just giving us a little bit of indication where do you see as a net revenue trending in 2025 given that Macro is weak, and you have some specific headwinds there, notably with the rundown of the Banco BPM project in Italy, and also some rescoping or re-insourcing in the Nordics. Just to understand, if you forecast some deceleration in net revenue growth next year, you are still targeting to grow around the current level. Thank you.

Good morning, Sebastian. Thank you for your question. Listen, on volumes in here, it's always very difficult because there are a number of factors that do affect the specificities of the different markets, different months, and so forth. But let me try to help you as much as possible. So first of all, summer. Summer was not bad, I want to say very clearly. It was a bit softer than what we were anticipating. When you look into the numbers, what has been missing a little bit has been the contribution, the strong contribution that we saw last year of international tourism, especially from three countries that are normally important for our geographies, being the U.S., France, and, sorry, actually, Germany and the U.K. And here again, I just want to make sure that we are clear. The volumes have been growing also for those countries. customers, so they've been a driver of growth, but less than the previous year. So it's a little bit of discontinuity here. How much of that is driven by a structural change versus simply the fact that the previous year levels were almost unsustainable is difficult to say. I personally believe the reality is the second. But let's see what happens next year. Instead of that, we continue to see good growth in every single market. The softer month in the summer has been September, but probably because of the fact that weather has not been good around the various geographies. Plus, there was one less weekend than last year. Well, actually, October is going pretty well. We see a nice acceleration in October. Again, it's difficult to explain in detail now. where and why, and so on and so forth, also because October may have probably, no, we'll have actually one more weekend compared to... Sorry? November, we'll have five as well. Sorry, November, we'll have five weekends. So, you know, you have all these things happening. With that, we see kind of a stable trend. In Italy, we see a good rebound in the Nordics, and actually in DACA as well. But we should never, and in Germany in particular, we should never forget that Germany is a place where we are probably winning market share, and therefore the volume trends that we see are not really the market volumes or the economy volumes, but they're also supported by a growing customer base there. When it comes to 2025, Sebastian, again, it's too early to talk about it, also because now the factors that you mentioned, macro trends, or the impact of certain discontinuities that we are aware of will become clearer over the next two or three months. And therefore, this is a conversation that we will definitely have in February, at the end of February. However, what I want to underline is the fact that now we have a total focus on the cash The excess cash acceleration delivery, the margin expansion, not obviously together with the top-line growth, but clearly our work as we prepare for the budget is focused on the three elements so that we can defend the cash generation, whatever top-line growth in the macro environment we are in will be.

Thank you.

The next question is from Josh Levin of Autonomous Research.

Good morning. Two questions from me. Worldline, one of your largest competitors historically, has been in a state of turmoil for the past year. It's not clear what's going to happen with that company. Has that affected your business at all? Have the problems at Worldline changed the competitive landscape? Are clients talking about it? And then the second question, Odin and Stripe are trying to gain more share in the SME space by partnering with platforms or integrated software vendors. What does that mean for Nexi? Good morning, Josh.

Well, listen, Worldline is difficult to say because Worldline is a slightly different company and different behaviors in the different markets there. we play. So do we see a major difference? Not that much. Clearly, we expect them to be a bit less probably active on M&A, especially in terms of what they pay for assets and stuff like that. But again, it's difficult to say for us. I think at the moment they really are a bit focused on their own specific issues and therefore let's see what the future plans will be. This is no new news for us and I think the SME focus is there and as you rightly mentioned, the SME focus is there through platforms and what they're trying to do with ISVs. We are definitely not surprised by that. This is something that we have been preparing for and actually we are very active in and this is And I will not repeat what our strategy and our progress is in this space because that's what we've been talking about six months ago when we were talking about our ISV strategy. I just want to remind that by now we have more than 500 partnerships across all our geographies. We are developing our own integration CRM proprietary platforms for that. And we really work with the locally relevant merchants. The one only thing that I would just add to this is that, so I mean, this is competition, new competition, and we are ready for that. If you like, the only caveat and factor I'd like to add to it is that, for example, in one of our countries, we see one of these platforms that has moved on, one of the two of them, And actually, now they're trying to migrate merchants from our local competitors, in some cases also from ourselves. And actually, we are quite successful in winning back these customers or retaining these customers, partnering with local platforms that we partner with. We bundle offers with our own, if you like, a bundling of partner software with our proposition. And we play our usual game, which is the local game supported by our local scale. And, therefore, you have kind of a global platform with global software and global payments provider competing with local platform with local software provider. And now we see that we can win in that space, and merchants are quite helpful in this direction. But, again, this is a new frontier. I think we will continue to talk about this for a long time.

Thank you.

The next question, sir, is from Hans Leitner of Jefferies.

Yes, thanks. I reckon you don't want to lean out of the window and talk about 2025, but maybe you can just talk from where you see at the moment, is there any major renewal or a contract ramp-ups? And then the second one is on your Salesforce expansion in Italy. Maybe you can talk about how much that contributes already to the performance, and is that fully ramped up? Any update on that would be helpful.

Thank you.

Good morning, Hannes. Listen, again, I think it's a bit early to talk about these impacts that you're talking about in particular, but normally we will see the impact of what you have heard in the market this year, starting from the Banco Stori or the Casa Centrale Bank, and then we have a few renewals in various markets in Greece, in the Nordics. So we have a number of these things. As I mentioned before, what really matters is not the fact that you have the specific renewals, because these things happen every year. It's more the size of it, and most importantly, the comparison year over year. So what we are assessing is more the year over year effect. of these coming out of 2024 where these impacts have not been particularly large. So this is a good conversation that we will have in February. As far as the tenant sales force, as we told you, we have now about 200 people selling in the market, and they actually represent already a material percentage of our front book. I don't remember the exact number. I think about 20% already, I think 20% to 30% in terms of customers, and probably more than that in terms of volumes. But actually, this is working nicely in combination with our bank channels. that we continue to successfully work with, and the 43-day combination of all of this that is doing well. And the focus now is not to increase the size of the Salesforce further, but is more not working on the productivity and the quality of what they deliver. Thank you.

The next question is from Sandeep Deshpande of JP Morgan.

Yeah, hi. Thanks for letting me on. My question is regarding your merchant services growth. Have you been able to break it down into the growth of the market itself, the conversion from cash, the contribution to it from your additional value-added products that you sell, etc.? ? Because clearly, the merchant services growth has slowed over the last few years, but is it entirely due to the market growth, or is it some of these other factors that are also slowing?

Good morning, Sandeep. No, but listen, the drivers that work are the ones that you've seen before, and our view to it is that when you look at this year, it's mainly the macro environment that we've been talking about and also the combination between macro and the slowdown of inflation that has been a supporting element in the very early days and is now unwinding. Don't forget also in the specific portal, in the specific business unit, some effects like, for example, the ones that you will have on issuing solutions as an unwinding of last year effects. That's actually not what we see. If you look at overall take rates, they tend to be quite stable. They continue to be quite stable year over year, which basically means that the customer value initiatives that we are driving on a continuous basis are kind of rebalancing the price pressures that are coming from competitions or in negotiations. So I really believe that the main driver has to do with market volumes in this space.

Thank you. The next question is from Alexandra Arsova of Equita.

Hi, good morning. Thank you for taking my questions. Three on my end. The first one, so before you were mentioning that you are retaining many customers, although very small competition. You also, of course, reminded about the closing of the renewal of the unit credit contract. I was just wondering, trying to understand whether maybe these kinds of renewals may bring some kind of lower pricing on your end in order to retain customers. So, in a sense, just understand whether we should expect that a smaller increase in EBITDA growth in terms of basis points, considering as a base the 100 basis points increase we are expecting for the coming years. The second one is again on efficiency and cost savings. The one you already announced this year of 400 people going away, do you believe this is enough or do you plan Do you think that there is need for further efficiency in the coming quarters or years? And the final one is maybe a follow-up on Worldline. There were some newspapers or rumors even recently that Worldline is selling part of its businesses or certain business lines. So maybe if you can comment on this, if you may be interested in Worldline itself or in some portion of its business. Thank you.

Good morning, Alexandra. No, listen, in general, the negotiation I've been talking about, they don't bring margin expansion with them. Obviously, you may have one or two where we are able to basically add more value and increase prices. Actually, that has happened last year as well, and we have a positive impact. But in general, the negotiations are more of a pressure on margins rather than As far as efficiency is concerned, we work on efficiency every single day, and into next year, we have a number of new initiatives that we are launching and so on and so forth, but you will not see, they are very specific, and we don't expect to see a broad-based, if you like, reduction of, organizational, if you like, reduction as it has happened this year. And therefore, we don't expect, by the way, to have new material severance impact that we will have, not the continuation of the one that was announced at the beginning of this year. But again, for us, efficiency is a rule of the game, and everybody in the company is focused on that. We are now already executing new measures that will have a positive impact 25, 26, and going forward, and that will help us, as I said, to deliver the cash acceleration that we have committed to. Last but not least, on Worldline, honestly, I will not be able to say, honestly, I should ask them what they plan to sell. At this stage, we don't know, and therefore, I can't say if we are interested or not. We just read rumors the other day that they're selling their third business unit, and that not something that is in our area of interest.

Okay, brilliant. Thank you.

Thank you.

The next question is from Antonin Baudry of HSBC.

Yes, good morning, everyone. Thank you for taking my questions. Two, if I may. My first one is on revenue growth profile. First of all, thank you very much for this detailed presentation on growth drivers The performance remains solid in Q3, but still lower than your mid-term guidance range. So my question is, beyond the difficult macro environments, and obviously at Santatis around 2025, what is your view today on what could be a normalized revenue growth profile for the group going forward? And my second question is about European consolidation of M&A. So M&A is what you could use of your cash could be in M&A, but we did not see a lot of deals during the past year, let's say. So what is your view on M&A on what is your pipe today on Bolton acquisition of merchant portfolio? Thank you.

Good morning, Anthony. Listen, on M&A, On revenue growth profile and so on and so forth, as you rightly said, every year really depends on, as I said, macro and the discontinuities that I've been commenting before. But also if you look beyond 25 in a normalized environment, we actually see structural growth being at least in the mid-high single digit and towards the high single digit space, especially for merchant services. as we have all the drivers that I've been talking about at full steam. And actually if you take out this effect and you normalize also our current growth is already going in that direction. And the plans that we are preparing into next year are consistent with that. Then as I said in the individual year that this may be the case in 25, you're affected by a number of other things. But for us the real focus is on long-term profitable growth, and obviously we'll also have to manage short-term pressures, and that's one of the reasons why we're so focused also on efficiency. On M&A, first of all, we have a lot of focus in actually rationalizing our portfolio and DBS in particular, and I think today You've seen a material, a new element with the completion of the sale of the EAD business in the Nordics. But here we are continuously on the market. It's our duty to stay on the market and consider new opportunities and so on and so forth. But the reality is that we don't see that much that is worth stretching ourselves on. And by the way, When we look at assets that we can buy, we continue to see it as the most valuable value creation opportunity for us by Nexi, to be very clear. And that's the reason why instead of stretching our research into high prices or strange M&A, we prefer to buy back our own shares as We generate more and more cash and we deliver at the same time. But we will continue to obviously consider opportunities. Obviously, we continue to talk to our partner banks, especially in Italy, that prefer to move into the direction of selling their book. That's really always a priority for us because that's the evolution of our partnerships. But that's the mindset we have. It's listen, no? We have more and more cash. Now, reduced leverage remains important up to a certain level, but actually the best asset we can buy in this environment otherwise is Nexi.

Thank you very much.

The next question is from Alexandre Sour of BNP Paribas Exane.

Hi, good morning. Thanks very much for squeezing me in here. Maybe a couple of things at my end. One is essentially housekeeping. Bernardo, could you maybe remind us of how we should think of earn-out related cash-outs for 2025 and 2026? And the other thing has to do with international debit cards in Italy, which is something you've been mentioning for a few quarters now. I'm just curious. when you fully manage those programs, you know, where are you seeing the most success? Is it with larger banks, sort of mid-sized banks, smaller banks? And in that context, you know, as we see some big wins from MasterCard in BPR and Unicredit, you know, is there anything in it for you? Thank you very much.

Good morning, Alex, and thanks for your question. Let me start from the second, and then we'll hand over to Bernardo to try to cover your first one now. On that international debit card, first of all, I think this product is attractive to all banks, okay, because ultimately, you know, that's where the national schemes are really struggling to keep up with innovation, complexity, and the demand of the digital consumers, especially the newer generations here. And the four international debit products are attractive and we serve them to all banks, from the largest one to the smallest one. Then what really makes a difference is the business model that we have. For example, for larger banks, we're actually a technology provider for them. We do everything, but ultimately it's on their license, it's on their product innovation roadmap, and obviously we are their technology provider. Now, when you come to medium-sized banks and smaller banks, this becomes instead an exit product that is where we have the next innovation at full speed with loyalty program, value that service on top of it, and we have a super, super attractive and competitive offering, which, by the way, goes well beyond the basic international debit product, goes into the business product, goes into an international premium product. I think we are one of the very few to have such a product. And we will continue to drive this in that direction. Today, this is something that we do mainly in Italy, but one of our most strategic initiatives to accelerate growth in issuing has really to do in exporting this type of business model beyond Italy and the other geographies, and targeting small and medium-sized banks, where we already see a lot of interest, but also, you know, corporates and fintechs, which is another very interesting space for us. Bernardo, on the first part?

Yeah, no, the question on earnouts is, as you see in our Six-monthly reporting in NRI, we highlight M&A and M&A-related provisioning. So, obviously, 100% of the earnouts based on their market-to-market data performance of the books we've bought has been booked as part of our net debt. What will be settled next year obviously depends on the position next year. We're talking of something in the region of 100 million euros or somewhere along those lines, which will be cashed out. I can't remember exactly what month next year, but when the year now gets calculated. And I think next year is the Intesa one, if I remember correctly.

All right. Thank you very much.

The next question is from Aditya Budavarapu of Bank of America.

Hi, Paulo Bernardo. Thanks for taking my questions. Just a few from me. Maybe just following on from what you just said on the international debit cards and trying to expand that outside of Europe. Can you just talk about the appetite you're seeing from banks in general for these cards and if maybe that's changing? Second, you talked about the normalized revenue growth for the group and said merchant services should be closer to high single legit. But in those growth drivers that you laid out so much in services, can you talk about the contribution from those to get to that high single digit level? And yeah, those are two questions.

Good morning, Adi. So on international debit cards, just to be clear, I didn't say beyond Europe. Europe is our footprint.

I'm sorry, I haven't gone beyond it yet, sorry.

Yeah, yeah, beyond Italy. No, but listen, we see in general that banks, especially the smaller ones or the medium ones, are more and more challenged in keeping up with the level of complexity that you have also on the issuing side of If you think about it, you have more and more product innovation coming from the international schemes. You have more and more new competition from fintechs that are coming out with innovative propositions. You have more and more compliance and rules to be respected and to be implemented. Think about the digital euro coming in, and therefore there is another part into the game. Think about the further and further segmentation with youth having new requests, business having new requests, and so on and so forth. And all this complexity is something that is becoming more and more challenging, I think, for banks to be handled. And that's the reason why we have this strategy that in Italy has been extremely successful and, by the way, also profitable. And we want to expand it beyond. And that's the reason why, by the way, I was talking about a portfolio of products. When we talk about institutional debt, it's not a problem any longer. is a portfolio. We have the basic proposition, we have the premium proposition, we have the business proposition, and we continue to segment. And all of them, you can have loyalty programs, better services, digital properties. And by the way, the way we have designed all of that in terms of technology platforms on the back of it is super flexible and can be adjusted to the needs of the individual bank with basically the customer interface of the bank with the digital integrations into the digital assets of the banks. and so on and so forth. And we believe this is the right way to think about the future of issuing in a profitable way, while when we look at the big issuing process in these and so on and so forth, our perception is that over time they're becoming more complex and less attractive financially, and therefore that's not really where our focus is today. When it comes to normalized growth, the way we look at it is that we are a company that has a long-term potential more into the mid-to-high single-digit structural growth rates with merchant services being more on the upper end and therefore more towards high-end, high single-digit to double-digit on structural growth. underlying basis in this really combination of the various factors now if you just think about it or in a market that is growing only in high single digit that contributes about 70 percent so you should take a six seven percent contribution from the top box there i think customer based growth is normally in the low single digit contribution but actually you should take 30 percent of that so those two things together bring in disease merchant services now only This brings growth in the space of whatever already mid-high single digit. And then it really depends on every year how much value creation you can drive from the customer base and how much pressure you have from extraordinary events. And that's where you go rapidly into the upper high single digit space. And we really focus on driving more and more growth also in the markets where we are already leaders from the drivers that I mentioned, such as pricing optimization, upselling, more advanced solutions, and value-added services.

Understood. Thank you. Very helpful. Just a quick follow-up on M&A. Sabadell, I guess that's been going on for longer than you expected, and I think that merger with BBVA could also take longer. So any comments on

I think we mentioned this in the past that we have reached an agreement with Sabadell basically that will make sure that if Sabadell remains independent with regards to the bid from BBVA and I have no idea whether that will happen or not for sure we won't know in the short term that happens there's a deal that we're happy to complete if that doesn't happen then we'll be free to exit the agreement. So I can't attribute any percentage of likelihood of success or not. You should think about it. I don't think it's something which we'll know for sure in the coming, in the next few months. I think it's something that we'll find out towards the end of next year. Have you heard this? Yep.

But again, as mentioned before, let's have a conversation around that topic in late February when we meet and talk about also next year guidance, because clearly thinking of capital allocation, that's one of the elements to be kept into account.

Yes, exactly. I mean, my question was actually going to be, do you still think that's the better use of capital versus, as you said, buying next year shares itself, given what you're saying?

Yeah, but we let you associate a probability of that deal going through. You're probably in a better condition than we are.

All right, thank you.

Thank you.

Yeah, and at this time, there are no more questions registered.

Well, so I think we can let you go. Thank you very much for participating. I guess the super simple message is we continue to deliver, even if the macro environment is a little bit less helpful than what we were expecting. But we continue to deliver growth. We continue to deliver margin expansion. We continue to deliver cash acceleration. And we are preparing for more into the future, leveraging structural drivers that are really, really, really visible and strong. Thank you very much. I'm looking forward to meeting many of you in the coming days. Bye-bye.