NEXI S.P.A.

Good morning. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the NEXE Full Year 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 NEXE. Please go ahead, sir.

Thank you very much, and good morning to everyone. Welcome to our call for 2024 full-year results. I'm here as usual with Bernardo Mingrone, our CFO and Deputy General Manager, with Stefania Mantegazza, who leads our investor relations activities, and a few other members of our team. Today, I will start as usual with a summary of the key messages, then I will spend a few minutes to deep dive on capital allocation, both in terms of how we see it and how we generate more and more cash over time, the results that we have achieved in 2024, and most importantly, the commitments we are taking for 2025 and going forward. I will then hand over to Bernardo for a full year results description, and then we'll come back to talk about next year guidance, close, and then open the Q&A session to answer to your questions. Now, let me start with the key messages, as usual, at page 3. Three key messages. First of all, continued delivery of growth, and most importantly, strong acceleration of cash generation. Revenues in the year did grow 5.1% versus the previous years, with merchant solutions going up 6.3%. EBITDA growth was at 7.1 percent, with a 101 basis points EBITDA margin expansion in the year, thanks to a very strong cost control throughout. The growth of excess cash has continued in a very remarkable way. We have closed the year at 717 million euros, which is a 19 percent growth versus the previous year. And overall, normalized EPS has been at 59 cents. which represents an 11% growth to the previous year, also embedding the effect of the buyback that we've done last year. Second message, we continue to shape the company for future profitable growth, which is our strongest focus. First of all, we did continue to progress the execution of our integrated payment strategy. Integrated, as always, means a combination of payments and software payments. especially for SMEs. In the year, we've been working with more than 500 ISV partners across the various geographies, and we have now, next, integrated payment software bundles in more, actually, than six markets in all the key markets. Second element that we want to underline, which is a strong value, not just for the year, but actually for the future as well, in Italy, we have been strengthening and strengthening our complementary channels for SMEs that basically operate on top of our bank partnerships in addition to our bank partnerships. And actually, in the last quarter of this year, of last year, these additional channels have been representing 30% of total new sales in the quarter, and it is up from about 15% last year. And the additional 15% is all driven by the new face-to-face channels that we have been developing throughout the year. And I also want to underline the fact that this growth is actually coming on top of the performance of the bank partnerships that has been in line with the previous years. Third point that we want to underline, we have been fully executing our efficiency plan and organizational synergies. And this is very well witnessed by the fact that in the last quarter of the year, our OPECs are broadly flat compared to the same quarter of the previous year. And last but not least, we also want to underline that we are leveraging as much as we can the opportunities offered by GenAI and AI more in general. For now, we've been focusing a lot on IT, both software development and software testing. and operations across the board. And we start to see some material value generated by the implementation of GENE-AI. And as we go forward, we will continue to do that more and more. Third key message, creating value for our shareholders. Let me start from the achievements from last year. Leverage ratio went down from 3.0 to 2.7 times EBITDA. Actually, net of the buyback effect, this would have been, before the buyback effect, this would have been 2.4 times. We've been upgraded to investment grade by FH ratings in December 2024, and you all know very well what it means for us. And we've completed our 500 million euro share buyback in 2024. Most importantly, going forward, the plan for 2025, going forward, we plan to return to shareholders most of the excess cash and we'll start distributing dividends from this year and then these dividends will grow over time, while at the same time we remain committed to maintain an investment-grade status. More precisely, in 2025 we'll return to shareholders a total of about 600 million euros, which is 20% more than last year. And these 600 million euros will be a combination of the 300 million euro dividends that we will start with and an additional 300 million euro share buyback program that we will be executing in the year. Overall, we have been delivering the guidance that we provided to you one year ago for 2024. Let me now move into capital allocation. And let me start by recapping quickly what we like to call our formula for this. We went through this, I think, about six months ago. But let me go through it again. We are benefiting from the combined effect of top-line growth, operating leverage, and what we call cash leverage. Revenues grow depending on the year, but we see continuous growth. And in 2024, this has been a bit above 5%. We continue to have, on top of that, very strong cost control. And this is generating geopolitical leverage. It's allowing us to continue to expand if the margin and therefore support more than 7% EBITDA growth. Together with that, we have CAPEX going down, recurring cash items going down. And over time, we will also see net cash interest Expenses going down as we reduce our debt and interest rates go down. And this is what is generating a very strong generation of excess cash, and most importantly, a very strong growth of excess cash that for the year has been 19% up to 717 million euros. And here on the right, you see the journey we're on. 2022, about 400 million euros. 23, about 600 million. 2024, more than 700, and we expect to see more than 800 in 2025. Now, let me go back to 2024 for a moment. What did we achieve across our three priorities? Debt leverage reduction, we have reduced leverage to 2.7 times EBITDA. which would have been before the share buyback 2.4. Here I want to underline again what we discussed in the past, our strong organic deleveraging capacity. If we were not allocating alpha billion to shareholders, we would have been deleveraging 0.6 times EBITDA in the single year. And we've also paid the debt maturities of 2024. We've reimbursed them for more than 700 million euros, and we plan to reimburse the alpha billion that we have maturing this year in 2025 with available cash. Second key point, in the year, we returned 500 million euros to shareholders through the share buyback. We completed in September, and we have canceled about 83 million shares. Last but not least, M&A. As we said in the past, our M&A activity is extremely focused on the most valuable opportunities that we assess with extreme rigor, and at the same time, we continue to rationalize our portfolio with a focus on DBS. In the year, it's important to underline the fact that actually, The money that came into the company through selling assets has been actually higher than what we spend on M&A. Therefore, in this specific year, M&A has been a positive contributor to cash that we could use to return to shareholders or to reduce leverage. Overall, this progress has been well taken into account by rating agencies that have been upgrading us to investment grade at the end of the year. Now, what is the plan going forward? Next page, page six. Again, the basis for this capital allocation is the cash that we have been generating last year, 717 million euros, together with the outlook for this year, 800 million euros, and more broadly for the outlook of the coming years where we expect to continue to increase the cash that is generated by the business. First of all, we will maintain as a key priority debt and leverage reduction here We have a clear commitment to maintain the investment-grade status that we have obtained, and in parallel continue on the gradual delivery towards the 2 to 2.5 times EBITDA target leverage as we discussed in the past. At the same time, let me go on the far right. We will maintain a very rigorous approach to M&A, again, with very focused and probably very small in size, very creative acquisitions. while at the same time continuing to focus on the rationalization of the portfolio in DBS. And now let me focus on the core of the message today. We will return more and more value, more and more cash to our shareholders. In here, there are two sides to it. If you like a longer-term view and outlook, going forward, we plan to return most of the excess cash generated by the business to shareholders. And as a part of that, from this year, we will start distributing dividends that then we expect to grow over time. More precisely, in 2025, we will start with a dividend distribution of 300 million euros, of about 300 million euros. The precise number is going to be 25 cents per share. And on top of that, we will also add 300 million euros of share buyback. In total, we'll be returning to shareholders about 600 million euros, which is 20% more than last year. And this is about 10% of the equity value of the company at current share price with an implied yield of more than 10%. Now, let me hand over to Bernardo for results.

Thanks, Paolo. Good morning. So, starting from slide 8, where we begin with a consolidated view of our P&L, Paolo has already mentioned Our revenues are growing just north of 5% for the year, slightly less in the fourth quarter due to some effects we'll speak of in the business units. But in general, performance through the year, albeit being seasonal as our business is, was pretty homogeneously spread throughout the year. The growth was pretty consistent as per our guidance back in February last year. EBITDA margin clearly peaked in the fourth quarter in terms of its secretion, 153 basis points. This is a function of the strong expected cost performance in the fourth quarter we'll speak of in a second. In general, for the year, we continue to increase our EBITDA margin by about 100 basis points as in previous years. All of this thanks to the operating leverage we benefit from as a business in this sector. Overall EBITDA grew 7.1% for the year, slightly less in the quarter at 6.7%. Again, pretty much in line with our expectations and guidance at the beginning of 2024. Moving on to merchant solutions, merchant solutions benefited, as most of our business, from strong growth in volumes throughout the year in terms of the value of managed transactions and international schemes. You can see the growth being just shy of 10%, 6.3% growth in the full year. A slight decrease in the growth rate in the fourth quarter, we see the call out of the right. We have highlighted how we've had, in certain regions in Italy, we have had the beginning of the impact of the migration of one large client, which was expected and started towards the end of the year. In other geographies, in the Nordics in particular, we suffered a bit from a slightly weaker macro and some phasing effects on partner commissions or scheme failures. these scheme-related fees and incentives. In general, I think it's important to highlight how we have benefited from strong growth in our core business of SMEs. E-commerce continues to support this top-line growth, and we have some visible contribution coming from upselling and cross-selling of value-added products and services. On the issuing front, I'd say a bit of a positive surprise compared to when we guided back in February last year in terms of the full-year performance. Overall, revenues grew in the mid-single-digit range at about 4%, just north of 4% in the fourth quarter, just shy of that. Even in issuing, you can see international scheme volumes growing just north of 9%, and I think the name of the game here continues to be strong performance in Italy driven by international debit product. We continue to upsell and cross-sell our advanced digital issuing solutions across the board. And I think the slightly better end of the year than what we had forecast has really got to do with delays, or let's call them phasing effects or delays in migration, particularly with one client in the Nordics. Slide 11 talks about digital banking solutions. Here we're talking little swings, one quarter to the other, which might impact, you know, very slow single-digit million of euros in the quarter, so it's very hard to comment on quarterly performance, especially in this business, which is less than the others, less than the others, tied to volume growth, but has a more infrastructure-like characteristic and has a lot of project work in it. So rather common in the full year, which is year-on-year growth of 1.6%. I think this is a strong performance given that in the past this was one of the businesses in prior years that was hardest hit by client losses coming from Bank M&A in Italy. And notwithstanding this, It is a business which can still grow the top line thanks to the exposure it does have to areas like instant payments and so on and so forth, which do provide some benefit from volumes growing. On slide 12, I would highlight the fourth quarter performance in Dachshund, Poland, which was double-digit. Southeastern Europe throughout the year was pretty consistent in terms of the high single-digit kind of growth around the 7%, 8% you see for the full year. Italy, I mentioned a slight slowdown impact in the fourth quarter, impacted by the banking M&A I was referring to earlier when I was speaking of merchant solutions in the Nordics as well, impacted by some phasing effect on commissions, which I also referred to in the generally weaker macro we have, especially in some of the geographies in the Nordics. Slide 13 on costs. I think we're pretty happy and proud of achievements during the course of 24. We had, during the course of the year, kind of indicated we're expecting full-year cost growth to be below 3%, is 2.9%, benefiting from the fourth quarter, which is essentially flat. As you can see, the HR costs were down 6%. That's not a surprise, as we carried out a very large restructuring, or not restructuring, but a plan to incentivize exits and right-size our workforce during the course of 24, which which basically gave its benefits mostly in the second half and primarily in the fourth quarter. On the non-HR front, we also did, I think, a reasonably good job of trying to contain upward pressure coming from inflation, but also let's not forget that close to 10% growth in number of transactions, which is what feeds our costs. Ultimately, our cost base is 20% variable, so that 10% growth in number of transactions, 10% or more, translates automatically into 2% growth in processing costs for us. And notwithstanding this, I think, you know, inflationary pressure, wage drift, volume growth, we managed to contain cost growth to 2.9% for the year, which is what we guided to, if not slightly better. On CapEx, the trajectory is a healthy decrease, close to 11%, 50 million euros less of CapEx in the year compared to the prior year. Obviously, this is a function of completing the transformation or the process, the progress and process towards completing our transformation. And this is notwithstanding the fact that we continue to invest to support our innovation, quality, security, but closing down platforms or data centers. We closed down our largest data center in Italy back in July, and work continues to rationalize the duplication of platforms and data centers and the streamlining of our cost base, which ultimately translates in a lower cost. absolute level of capex. Even in relative terms, we've come down from 15% to 13%, which is another step in the right direction. Moving on to non-recurring items, if we focus on integration and transformation costs, they're down 20% year-on-year. I think last year they were down more than that, 50%. But the downward trend is something we expect to continue going forward. It's in line with expectations. We also had a very large one-off charge, which was fully booked in the year, €164 million in terms of severances. Speaking of the benefits we got from that severance with the costs, this is the upfront P&L item. Half of this more or less was paid out in cash during the course of 24. The remaining half will be flowing through our cash flow in 25 and 26. Cash, Paolo spoke of the close to 19%, close to 20% year-on-year growth of excess cash. I think this was pretty much in line with with expectations we guided to north of 700 million euros. A lot of work went into optimizing working capital. You see it was slightly positive in the year. But in general, I think the excess cash result for the year reflects the underlying performance of the business. So EBITDA growth, the cash expense, the CAPEX coming down, non-recurring cash items obviously slightly lower. slightly higher than what we would have had if we hadn't had their severance. But notwithstanding all of this optimization around the board, even on cash taxes and that cash interest expense helped achieve this, I think, strong result on cash generation. Moving on to slide 17, just a quick recap on some of our key strengths. I believe the strong increase in cash generation, 20% year-on-year from 600 to 700 million euros. and also how this translates in terms of earnings growth. You can see how normalized DPS, so stripping out exceptional DNA related to M&A and the non-recurring items, that is growing from $0.54 to $0.59, 11% year-on-year, compounded by the effects of the buyback we bought back, more than 18 million shares during the course of last year, which obviously helped stimulate this growth. Normalized net profit being in excess of 700 million euros, 731 million euros. Finally, before handing the floor back to Paolo on net debt, I think this is, again, another – 2024 was a remarkable year for us in terms of capital allocation. We started to buy back shares and return half a billion to investors and at the same time reduce gross debt by three-quarters of a billion euros. Importantly, we were upgraded to investment grade by one of the rating agencies – This was a long time in the making. A lot of work went into this after a very significant number of consecutive upgrades. We have managed to secure funding from EIB and Casa de Positive Prestity to support our growth, our CAPEX, and this is very long-term financing, very stable, very attractive rates. And you see here, we call out the fact that we're in the process of managing maturities well beyond 2025, which will be paid down in cash, as Paolo said. But looking to 2026 and 2027, we're now talking with our partner banks with regards to the term loans, the RCF, to try and refinance them in a very effective way. We've received... significantly in excess of what the commitments, which are significantly in excess of what is due in 2026. And therefore, in the coming days, I think we will be able to announce successfully refinancing maturities for 2026 and possibly 2027. So in terms of the maturity profile of our debt, that 2.4 years will be substantially increased in the not-too-distant future. Let me hand the floor back over to Paolo with regards to our guidance for 2025.