Nexi Spa Azioni Ordinarie

Good morning. This is the Cards Conference co-operator. Welcome and thank you for joining the NEXI first quarter 2025 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 Paolo Bertoluzzo, CEO of Nexi. Please go ahead.

Thank you, and good morning. Good morning to everyone. Welcome to our call for the first quarter of 2025 results. As usual, I'm here with Bernardo Mingrone, our Deputy GM and CFO, Stefania Mantegazza, who leads our investor relations operations, and Stefania. a number of other colleagues in case we need their support to answer to your questions. Today, as usual, we start with an overview of the key messages. Then I will hand over to Bernardo that will cover the results for the course, but we'll also deep dive on the topic that we have chosen for today, which is actually our progress on debt and, more in general, capital structure management. And then we come back for conclusions, and most importantly, together with Bernardo, for answering to your questions. Now, let me start with the summary of the key messages of the day, page three of the document. First of all, point number one, continued delivery of profitable growth in the quarter. Revenue went up 3.7% in the quarter, with merchant solutions up 4.5% versus the first quarter of last year. And it is despite some effects from the leap year and the different Easter phasing that is a disadvantage in 2025 versus 2024 for the first quarter. In this quarter, we also did continue to show strong cost efficiency control. Cost did grow only 0.8% in the quarter thanks to continued cost control and operating leverage. As a result of revenue growth and strong cost control, EBITDA went up in the quarter by 7.1% with an EBITDA margin expansion of almost 150 basis points. Second key point, we continue to focus our attention, the vast majority, to be honest with you, of our attention into shaping next year for future profitable growth. Four points that we want to underline. First of all, we continue to make progress on integrating software payments into strategy execution in the quarter. By the way, we also signed a strategic partnership with Planet in the vertical of hospitality for the large merchant segment. We will start from there with Planet with focus on the Nordics, Thirst, Italy, and DACA to come. And we probably then extend the partnership into additional verticals where they are particularly strong, such as luxury and high-end retail. Second point, we confirm that we continue to see a strong traction from our direct complementary sales channels in Italy, where we are adding a strong firepower to our bank partnerships that are there, will continue to be there. And these additional channels are now representing about 30% of the total new sales in the quarter. Third point, on top of our very strong focus on SMEs that remain the core and remain the priority for us, we are increasing, especially in certain geographies where we are already market leader, our focus on the mid-corporate and national LACA segments. which is a segment that is particularly interesting for us on the one side because it's profitable, and on the other side because it's a segment where we gain a lot of traction with our positioning that is combining scale that allows us to have product strength, technology strength, and at the same time, local in-market presence and entrenchment, which is very, very important for these players that require a lot of local support across all possible fronts. Last but not least, as you've seen, we continue to have a strong performance on cost, but we're already working, as you can imagine, into the next round of efficiency measures, looking forward to 2026 and beyond. Third and last point, we are creating value for our shareholders. As we announced three months ago, we are returning in 2025 600 million to our shareholders, which is 20% more than last year. We will pay the 300 million euro of dividends, our first dividend on the 23rd of May, and on the same day we will also start our share buyback program of another 300 million euros. Second point, as you may have seen, we've been upgraded to investment grade by Standard & Poor's in March after the same upgrade from Fitch at the end of 2024. And last but not least, we have completed in March a 2.9 billion euro financing plan, and we've established more recently our EMTN program that will allow us to further optimize the financial structure, and Bernardo will deep dive in these topics Overall, based on what we have seen in the first quarter of the year, we confirm our guidance that we gave you three months ago. Now, let me hand over to Bernardo for results.

Thanks, Paolo. Good morning. Starting on slide five, revenues, we brought the announcement forward in terms of the growth in revenues. That doesn't come as a surprise. 3.7% growth year-on-year, as Paolo reminded us. Last year was the leap year. Easter was at the end of March. This year it's in April, and that has affected these dynamics slightly, just like for most other payments companies. I think the strong point on this slide to highlight is the margin accretion, close to 150 basis points in the quarter. There are timing and phasing effects during the course of the year. We'll speak of them in a second as we go through. I would say strong performance in the quarter with regards to our leverage delivering payments. The margin accretion in the EBITDA growth, which you see, is just north of 7% at 386.9 million euros. Moving on to merchant solutions, we have, I'd say, continued growth in the segment, in the business unit, which continues to be supported by volume growth. This is the business unit which most benefits from volume. From volume growth, we call out on the slide the fact that this volume growth is generalized across the group, and especially in Italy, Germany, and Poland, notwithstanding the calendar effects that I spoke of earlier and notwithstanding the fact that we have initial impacts coming from the loss of the Italian banking client. We have also spoken of in the past slightly, I'd say, the volume growth in the first quarter re-accelerated during the course of April clearly because also of the calendar effects that I was mentioning earlier. We highlight and call out the fact that we continue to grow our customer base and the SME segment, the most important one for us. This is particularly true in Germany where we gain market share in Poland and also in e-commerce and we continue to get contributions, important contributions to our top line growth from the upselling of value-added services to our customer base. Moving on to issuing solutions, we continue to show growth on the top line in issuing, again, driven by international schemes. Clearly here the contribution of volume growth is slightly less on a percentage basis than for merchant solutions. We continue to derive most of our revenues from international schemes. Even here we have a bit of a calendar effect, as we mentioned, for merchant solutions. But I think it's important to continue to highlight the contribution to our top line growth of international debit in Italy, which is a very strong contributor to the top line in Italy and for the group. And even here, the upselling and cross-selling value-added services and the focus on advanced digital issuing solutions and the rollout across Europe. Digital banking solutions, the division which is most infrastructure-like in terms of its characteristics, grows in the quarter close to 1%. We have, from the volume-driven businesses within digital banking solutions, it's a good development from instant payments and its adoption across Europe with volumes growing very handsomely in that segment and other areas like the Italian public sector. The Bill Payments Campaign, which is contributing again to the top-line growth in the bank payments hub, payments as a service proposal, contributing to this. Moving on to the regional distribution of growth within the group, I'd say that most geographies contribute to the top-line growth. We have some specific impacts in certain geographies, the net of which obviously contributes to the top-line growth of 3.7%. In Italy, we had, as I was saying earlier, strong support from international scheme growth notwithstanding the leap year in this race to phasing. However, we also had some project phasing contributing to this, and as I was mentioning importantly, the initial contribution or negative impact of the exit of some clients, which at the end of last year started to pick up in terms of volumes in the first quarter of this year, and we will have for the remainder of the year. In the Nordics, the weaker macro, I'd say, is what I would call out in terms of the impact on the Nordics. And notwithstanding this, we have a top-line growth in the low single-digit range. I'd say Easter is probably less relevant here, but the leap year obviously contributes to this as well. DAC, we have, you know, continuous strong year-on-year growth in merchant solutions in Germany, which is very high single-digit in terms of growth. We highlight here 9% growth. And then we have an issuing client impacting our top line in Germany. Obviously, for Germany, it is more relevant than it is for the group. However, the exit of this client started a number of years ago is impacting the top line growth there. In CSCE, I'd say that the negative number, which might stand out, is more to do with phasings of last year's first quarter impacts, one-off impacts, which were positive last year, less positive. less relevant this year in Poland that swing the balance. In terms of just while we're on this page, just to clarify the fact that we have now, as we continue working on one next year, as Paolo was suggesting, one of the things we're doing is aligning our accounting and reporting systems, and we're now reporting Poland in CSC no longer together with Germany. The database will be aligned in the future, and this allows us to align the reporting with the way we manage the business within Nexi. Page 10 on cost performance. As you know, we have a natural aversion to cost growth, and we focus a lot on managing our cost base to deliver the most out of our operating efficiency. costs were growing less than 1%, notwithstanding the fact inflation is higher, notwithstanding the fact that volumes are driving about 20% of our cost base. The number of transactions growth is driving our cost base, 20% of our cost base. Notwithstanding this, we have managed to limit the cost growth to 0.8%, which is, I think, a very good result. It is fair to say that in the first quarter this year, we benefit from a year-on-year comp in HR costs. You know that last year, We had a large transformation initiative which led to about 1,000 people exiting the group. Most of this happened in the second half of last year, so the first quarter is the one where we have the biggest year-on-year effect, and you see that in the minus 5.4%. This will come down during the course of 2025. However, we manage our cost phases one, and these phasing effects are all known and planned for when we give our guidance, so there's absolutely no surprises in this. Moving on to slide 11, before we go into deep dive on our capital structure, you can see leverage is now 2.5 times. This is coming down every quarter, as you see in the bar chart here. If you take a step further back, if we go back to 2021, we started this journey after the mergers of Nets and Sea at 3.6 times. If I go further back, when I joined the next year, we were 6.5 times leverage. All of this just to say that our business is one which, thanks to its growth and the EBITDA, thanks to the strong cash generation, is a business which can leverage pretty quickly and, more importantly, predictably, which is what we bank on in managing our cash allocation, our capital allocation strategy, which Paul reminded us of, includes a $300 million dividend, which will be paid later on in the month in a buyback program, which will start once the dividend has been paid. We also do this whilst at the same time reimbursing maturities as they come due. We've reimbursed three quarters of a billion euros last year. Another half a billion is in the process of being reimbursed. We have spread, and we'll look at this in a second, about three billion euros of maturities, which came due in 2016 after a large renegotiation of partner banks. And we're now ready to approach the market with senior unsecured bonds as an investment grade issuer, thanks to the establishment in the MTM program. Moving on to the final chapter before I hand the floor back to Paolo, we thought it would be helpful to just take a moment to review our capital structure now that we are investment-grade by at least two rating agencies, which makes our future issuance eligible for all kinds of indices and gives us access to a different pool of investors and markets for our debt. Slide 13 just summarizes what we said back at the beginning of March with our four-year results presentation. Our commitment is that of remaining investment-grade going forward, and we target the leverage of between two and three years. We're there at this point in 2025 in the quarter. Given the phasing of buybacks, et cetera, this will change in the course of the year. But that is our primary commitment we make. We are returning capital to shareholders. We spoke of that, and we will – and we will focus only on very selective and value-creative M&A acquisitions, as, frankly speaking, we've done so in the past. This is both on the buy side and on selling. We always review our portfolio to identify assets which are not core to us or have better owners than Nexi to dispose of them, and even, of course, we sold a small capital markets business. We also sold a 50% stake in business in the Nordics. Site 14 reminds us of the journey in terms of the leverage, which I was speaking of earlier, 3.6 times at the time of the mergers with Nets and SIA, 2.5 times now. This has actually been 2.3 times the leverage if we perform it for the share buyback, and we'd probably end the year, and this is not guidance, but we'd probably end the year below two times if we hadn't decided to allocate 600 million euros to buybacks and dividends. So What this slide is aimed at showing is just the point that I made of the fact that our business, given its characteristics, is one which the leverage is organically pretty quickly over time. Slide 15 summarizes our approach to debt management, which I believe to be sound, disciplined, and the key recent events. First and foremost, our journey towards investment grade. Started off from single B plus a number of years ago. We've had eight rating upgrades since January 2022. We're now investment grade by S&P and Fitch, and Moody's has upgraded us in terms of its outlook to positive, which is all good news for us. The debt repayment and refinancing, over time, we have discussed why we are carrying cash in our balance sheet, why we're managing the debt we were managing. The overall cost of debt has always been pretty low as a function of the time in which we We issued the bonds, the convertible bonds, got the bank loans, etc., and we are having a positive carry effect on our interest margin thanks to the fact that the cash balances were being deployed and invested at a higher rate. Nonetheless, last year we started to pay down this debt given where we were in our journey of transformation of Nexi, and we started to pay back some of the cash generated to our investors with the buyback which was completed in the second and third quarter last year. During the course of this year, as you know, we will continue to pay down the maturities, those in June, in addition to the three-quarters of a billion reimbursed last year. And during the course of the first quarter, we renegotiated 2.9 billion euros of financing for us. These were maturities, bank loans, which are insuring 26 and 27, as well as increasing the size of our RCF to 1 billion euros, which gives us increased flexibility to manage the remaining maturities in the shorter term. We've also filed registration and established a $4 billion EMTN program. This makes us basically ready to tap the investment-grade market with new issuances at some point in the future. Slide 16 is the final one on the debt structure. The first chart shows where we are. I believe a well-diversified and balanced debt profile, diversified in terms of the investors we can access to lend us money well-balanced in terms of the various mixes of debt that we have. And if you look at the pro forma schedule on the bottom of the page, well spread out in terms of maturities of the maturity profile, which has been increased to 3.3 years from 2.4 years, and a cost of debt that fortunately for us didn't spike during the period of rate hikes given the predominantly fixed nature of the debt and the maturity profile we had set up before the rate hike cycle, and now we're able to refinance at rates which bring this 2.35% down from where it was before, it was 2.7%. With no maturity walls ahead of us, and with our ability to further optimize the spread of these maturities over time as time goes by, thanks to the fact that we now have a truly MTN program which is extremely flexible and helpful in that sense. That said, let me hand the floor back to Paolo for his final remarks and guidance for 2025. Thanks.

Thank you, Bernardo. Before I move to guidance, let me just make one comment on what Bernardo has just been covering. I think some time ago we told you that our basically landing spot, optimal landing spot for leverage would have been 2 to 2.5. Let me underline the fact that at the end of this quarter we are at 2.5. There will be a 2.3 if we were not doing it the buyback of half a billion last year. And without returning further 600 million euros to our shareholders over the next few weeks, by the end of the year, we will be actually closer to two. So I guess you never say mission accomplished on these things because they are always open topics for us. We continue to focus a lot on this, but clearly we are landing the company in the situation that we did commit to you some time ago. Now, let me close by first of all confirming our guidance for 2025 based on what we have seen in the first quarter of the year and our results and the market dynamics that we observe we confirm our guidance for the year that as a reminder says that we grow net revenues around low to mid single digit and a bit of margin by at least 50 basis points as you know this performance will be affected, is being affected by a number of exceptions in the year that are actually larger than usual. Underlying we see a growth acceleration, which is also what we have seen to a certain extent in the first quarter of the year. As a combination of all of this, we expect to generate an excess cash of at least 800 million up at least 100 million euros versus the 700 of last year. Let me just close by summarizing again the key messages on page 19. Again, we started the year with continued delivery of profitable growth, revenues up almost 4%, EBITDA margin expansion very strong in the first quarter. We continue to focus on future growth of the company, future profitable growth of the company. And last but not least, a strong focus on the recreation for our shareholders with the dividend and the buyback starting in a few days. Let me stop here and let's open to your questions.

Excuse me, this is the Costco conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and 1 on the touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question, may press star and 1 at this time. The first question is from Mohamed Boualla from Goldman Sachs. Please go ahead, sir.

Great. Thank you. Morning, Paolo. Morning, Bernardo. A couple from me. First of all, Apollo, could you comment a bit on the visibility you have? I mean, you talked about the underlying dynamic being still pretty good. I know we have the headwinds coming up over the next few quarters, starting in sort of merchant services this year and then kind of more on the issuing side next year. So how do you think of that sort of visibility on some of those headwinds? But more importantly, you talked about April, slight acceleration in April. So when you think of that underlying growth trajectory, which is closer to the sort of mid-single digit, how do you expect that to evolve and what sort of assumptions do you sort of make for any potential macro headwinds in terms of slowing consumer impact? And then secondly, obviously on the leverage, obviously you're starting to return cash to shareholders. And you said you would be kind of close to two times You know, is the target of the medium to hold this two times and then just, you know, return all excess cash back to shareholders, or would you be inclined to kind of level down further, or are there any kind of interesting M&A opportunities that you see in the marketplace? Thank you.

Good morning, Mo, and thank you for your two questions. Let me take the first one, and then I will hand over to Bernardo for the second one. Listen, I think, let me start from the second part of it, actually. As we said, the volumes in the first quarter have been, to be honest with you, not completely easy to be understood because of this number of discontinuities versus last year. Leap year, Easter phasing, a number of bank holidays here and there. So, and honestly, we're really talking about only a few days or a few weeks left. In April, we've seen an acceleration, especially for March. And again, that's supported by a better phasing of Easter in April this year versus last year. So it's not a surprise per se. It's nothing that we were expecting. But in general, we remain cautious on macro for the rest of the year, as I think we were already three months ago, I guess. The uncertainties that we all have around the world for now are not particularly impacting or at least not very visibly the volume trends. If you really want to look for something very specific, you will see a little bit of softness on the discretionary spending, for example, on hospitality, restaurants, these type of things, while you have a very strong resilience more into the grocery segments, the non-discretionary spending segments. But again, this is not very material, and most importantly, it doesn't have any major mixed effects on our numbers. In terms of how we expect the rest of the year to unwind after the first quarter results, let me basically confirm what we discussed when we announced guidance three months ago. We were expecting, and we also shared it with you, that the first quarter will have been the strongest quarter of the year. During the rest of the year, we will have basically three effects coming in, that in any case we expect to lend us to guidance. I want to be very, very clear on this because they were absolutely expected. On the top line, we will have the gradual, more feasible effect of some of the bank situations that we had in Italy last year and a couple of years ago that will show some more impact in Italy. and in merchant services in particular. While, again, as we go through the year, we will have some of the other more price discounts or discontinuities hitting mainly the other regions in issuing. And these things will come in throughout the year, and we'll comment them together. But for now, we don't see any major difference from what we were expecting, and this is what we'll soften up. the top line during the coming quarters versus a strong performance in the first quarter. And this has very little to do with macro, honestly. This is really our own phasing of effects. And then on the cost side, again, the underlying performance will continue to be strong, but as I think Bernardo also pointed out, Reminded everyone, this strong performance in the first quarter of this year, and by the way, also the latter part of last year, was also supported by the rate sizing that we had on the personal cost in the second quarter last year. And therefore, you will have a little bit of the unwinding of that in the second quarter, and then almost a full unwinding of that in the second half of the year. And therefore, you will see cost increase. the cost side coming up a bit. But again, all of this is planned and under control and is within the guidance expectations that we had. Thanks for the question.

I think the purpose of having this section in the document is to kind of highlight the optionality and the alternatives that the incoming investment grade offers us and The work we've done to reshape the maturity profile of our debt helps to kind of prove the point. I mean, if you believe our guidance, we obviously do. Otherwise, we wouldn't be giving it to you. We'll be making more than 800 million euros of cash this year. And if you make growth in this, it won't be too long before we're making enough money or free cash every year to reimburse the maturities as you've seen them described on page 16. And therefore, deleverage will be very quick if we use all of that cash to pay down the gross debt and go to zero and become cash positive in the not-too-distant future. Does that make sense? Probably not. That means that we have options available to us to decide what to do with this excess cash. The fact that we're investment-grade doesn't really impact me too much in terms of the cost of the debt. We're already priced almost as an investment-grade issuer when we're sub-investment-grade. But what it does do is give me huge flexibility in terms of accessing the market when I want, as quickly as I want to capture opportunities and optimize the cost of this debt. It gives me the ability to become a very frequent issuer in terms of shaping the curve going forward, which means that I can basically not play around, but optimize the leverage profile, which becomes, I think, less relevant given the dynamics. It gives us the ability to capture opportunities in terms of returning capital to shareholders, even more than the cash generated in the period. We've already made a commitment in that respect, but does that mean that we can only distribute the excess cash? No. We could bring leverage if we're below 2 to 2.5 times to continue to go down below 2 if the cost of the debt is high because of rates. I think the main point I want to make is that we believe that leverage now offers us an opportunity rather than being constrained. So much so, frankly speaking, that I think it's superfluous to continue to report the chart we normally put at the end of the first, you know, the quarterly presentation in terms of the evolution of the debt, and we'll probably move to a half-yearly kind of reporting of that as we become a repeat issuer in the investment-grade market and manage our debt to optimize the curve, pricing, and the capital structure.

Maybe then you just... Yeah. Moe?

No, no, go ahead, go ahead.

No, I just wanted to reiterate a couple of points that we made in the past. The first one is that, considering everything that Bernardo said, that we made a clear commitment to investors last time when we presented our capital allocation strategy that we would have been basically giving back to the market at least 50% to the majority of investors. our excess cash that, as you know, is growing and is growing very materially. And this is in the context of everything that Bernardo has said. And that's after a continuous leveraging to the levels that we have mentioned and also after the M&A opportunities that we see around and we continue to explore. that, as we speak, are not that material. We continue to have a very strong focus on our organic growth and on organic development.

Got it. Thank you. That's super helpful.

Thank you.

The next question is from Justin from UBS. Please go ahead, sir.

Thank you very much. Good morning, Paolo Bernardo. A couple here from me as well. So I wanted to talk a little bit about the decommissioning of old platforms. I think one of the challenges can be migrating merchants off of one platform onto another, which can cause service disruption, dissatisfaction, and possibly churn. I've heard others in the industry simply forcing clients off of old platforms. Can you clarify your approach? Can you talk about the process for decommissioning platforms in a little bit more specificity, how you think about sunsetting old platforms? and specifically the work that goes into us. And can you remind us a timeframe you expect to be completed? Second question is just around the DBS business. Just want to clarify again, I know you don't comment specifically on press reports, but why you might be contemplating moving some of those assets. I would have thought that operating many of the bank payment schemes and some of the things that you were just talking about, such as the bill payment offering that you have, provide a little bit of synergy across your financial institution clients understanding it's not the fastest grower, but also is a steady cash generator. Maybe you could just talk a little bit about the different assets you have within that business and your priorities going forward. Thank you.

Good morning, Justin. Thank you for your two questions. Let me start from the first one, the commissioning of platforms. Listen, this is clearly an open topic, something on which we work on a daily basis, I would say. Just to give you an example, we have just migrated our DAC merchant services operations from a Pfizer old legacy platform into our next generation platforms. And so we know very well now where the challenges are and also where the solutions to these challenges are. So we have our own plan and we are committed to continue these migrations. To be honest with you, we are not obsessed with it, and I think you also have to be very, very careful in being obsessed with it, because there is always some kind of a cost and complexity when these migrations happen. This is clearly much higher when you talk about issuing than when you talk about merchant services. But nevertheless, also in merchant services, there are certain complexities. And the reality is that there are ways, when you operate more somehow local platforms, you also have certain advantages because you can serve the needs of local merchants much more effectively than what you could do with a standardized global or a multi-market platform. And at the same time, there are different ways that allow you to capture synergies and develop innovation also on top of different platforms if you basically create orchestration layers and API layers that allow you to roll out innovation on the front end of the business for merchants on top of processing platforms that can be different. Let me give you a super simple example. We are enjoying a very strong position in e-commerce in both Finland and in Poland, and this position is basically driven by a lot of efforts that have been done over the last 10 years, not the last year, to make them incredibly fitting to the local environment, the local payment methods, to the local market. requirements from merchants, from banks, from these local institutions, and it would make no sense to try to migrate these very successful solutions that are, by the way, incredibly efficient to be run on our target platforms where, for example, we are migrating most of the rest of the business. So yes, we are focused in progressing these migrations. We know how to run them. There are complexities. Then we know how to manage these complexities. But we are really not obsessed with it, given our strategy, our positioning, and also the way we handle innovation on top of different platforms. On DBS, DBS is a very nice business that, as you see, is more or less low single-digit growth. It's cash-generative and is a business that we like. We said actually two years ago, almost two years ago at Capital Market Day, that we have been rationalizing the portfolio of these businesses, which is something that we are progressing, again without hiring because we really don't need to sell a part of this business. But the reality is that we believe it's healthy when you have opportunities to focus the business on the more core and strategic future development and that you have someone that you believe that is able, maybe sometimes in partnership with you, to give more focus, more investment, and therefore being a better owner, also to consider potential dismissals there. Depending on which part of the business you look at, you have higher synergies or lower synergies. In some cases, no synergies at all. But this is something that obviously we are considering when we assess our own options. So for now, we are happy owners of the business business, and we continue to develop it.

Got it. That's perfect. Thank you very much. Thank you.

The next question is from Marco Maglioli from Jefferies. Please go ahead, sir.

Hello. It's Hannes, actually, from Jefferies. I got a couple of questions. The first one with the people reduction you called out last year that you reduced 1,000 people. Maybe you can tell us how much of inefficiency you still see in terms of the personal cost structure. On the other hand, the other operating expenses or non-personal grew ahead of revenues. So maybe you can talk there a little bit about the cost focus. And then maybe just give an update on your partner infrastructure or partnerships, especially around the ISVs. Thank you.

Hi, Hannes. This is Paolo. Sorry, can you just repeat the third question because I'm not sure I got it.

There was just the second question around partnerships in particular, you know, with ISVs. Okay. How is it progressing? Who do you compete there? Do you again share within them? Thank you. Sure, sure, sure, sure.

So, again, good morning, Hannes. Let me take the one on people inefficiency, then I will hand over to Bernardo, and then I'll come for the broader cost comment, and then I'll jump back on the ISVs. Listen, on people, and the reason why I want to take this is also because it's a very important topic. It's also a very delicate topic. Last year, we took the opportunity that was presented by, honestly, the combination of three companies that happened by now three years ago, and as we got the company under one roof, under one organization, we call it one next year, then the opportunity to basically capture the synergies of being one larger organization became more visible, and most importantly, we could go for them with a high level of control, which is what we've done basically last year around, as we said, second quarter slash mid-year. Now, going forward, I personally believe that there is always room to generate more efficiency. I think it's the rule of the game, and we work on efficiency every single day regardless what the starting point is. To be honest with you, difficult to see anything similar to that. However, at the same time, we continue, for example, rationalize and create efficiencies in our back-end system. For example, you're allowed single finance operations, a single HR operations system, and so on and so forth. But at the same time, we also see the opportunity and in some cases the need to invest on the front end of the business. For example, salespeople on the ground or actually innovation. So do we see something similar happening in the near future? Honestly, no. Do we continue to work on this and we'll continue to reshuffle and optimize it? Yes, every single day. Let me hand over to the broader point. Yes, Bernardo.

I think, Hannes, for starters, I'd go back to our guidance for the year and some comments we made in the past. I mean, we believe cost this year as a whole, and we guide cost as a whole, will be well below last year in terms of cost growth. Obviously, we have inflationary impacts on our cost base, and they hit the non-HR costs more directly. We obviously have wage drift, but we absorbed a lot of that with the renegotiations, which usually are once every three years, for instance, in Italy, and not as direct as the inflationary hit we have on non-HR costs, which are most immediate in certain cases. We also have the direct impact of volume growth, which I was mentioning earlier, which hits the non-HR cost component. And as the number of transactions increases by 10% plus every day here and here, we have that impact on our non-HR cost, which is direct. And then we have a number of measures which are more, I would say, Let's say they're phased over time, which are those aimed at reducing the impact of this upward pressure on costs, which includes, for instance, the synergies coming from closing data centers. I think we've heard in the past the question we had from Justin on sunsetting platforms, et cetera, which allows us to mitigate this cost growth. What I expect to see for the year is that year-on-year effect that you see in the first quarter in terms of HR costs to be materially different and lower. And the same goes for the non-HR costs, which are increasing 6% or so in the quarter. For the year, they're not going to be increasing 6%. It's just phasing. Overall, we manage our cost base as one, and that cost base will grow year-on-year much less than it did last year.

Let me just come back to your last question on integrated payments and partnerships with ISVs. We continue to march ahead, as I mentioned in the beginning, with our partnership approach. You may remember that there are two sides of our strategy. On the one side, we partner with as many ISVs as possible, obviously focusing on the best local ones across the different verticals, and basically every quarter we add new partners. And we do this recognizing the fact that the market is in different phases in different geographies. In general, as we discussed very many, many times, the European market is well behind the U.S. market and is also moving much slower than the U.S. market and remains incredibly fragmented differently from the U.S. market. But nevertheless, in the Nordics, you have a more developed situation, and that's actually where we also have the highest number of partnerships. Italy and, in general, Southern Europe are instead in the early stages of development, with DAC being somewhere in the middle. Nevertheless, we progress our partnerships across the board. I think today we are above 500 partners that you can somehow categorize into the ISV space, which is a very broad space because this is evolving very rapidly. You have the traditional ECR providers that are becoming ECR providers, and then they're trying to move into software. providers and so on and so forth. And we obviously try to capture these relationships as they develop. Then there's a second part of our strategy is actually bundling our proposition, our payment proposition with their software proposition. And here we just select two, maybe three partners per market, per geography. And we go to market through our Salesforce with these partners under a Nexi commerce solution. that you normally try to focus on retail and hospitality restaurants, actually, in a more focused way. In here, we're already out in several markets with these bundles. We are learning, and it is a process here. But I think that by the end of the year, we'll be out with an actually integrated proposition across most of our geographies. I'm sure we'll continue to talk about it in the coming calls.

Thank you, Marc.

The next question is from Sebastian Stabowicz of Kepler Chevrolet. Please go ahead, sir.

Yes. Hello. Thanks for taking my question. One of the tech rates on MS solution, they have improved nicely in the first quarter. What was the driver behind the improvement in the tech rates in Q1, and how do you see tech rates trending in the coming quarters and in The second one is linked to your disposal strategy. Have you made any specific progress with respect to the disposals of non-core assets? And what is happening at Red Pay today? Thank you.

Hi, Sebastian. Thank you for your question. I will let Bernardo cover the second one. We made some progress on smaller things, but he will tell you better. On the first one, on take rate, You know very well, I think companies in the past that the measure of take rate is clearly a very easy KPI because it's total revenues divided by total volumes, and therefore everybody gets it and understands it. But, however, it's very, very much affected by a number of very different things, including phasing, including special projects, including initiatives that are very specific. So yes, this is going up in the first part of the year, but it's also supported by a number of specific situations that, by the way, Bernardo also mentioned. And by the way, never forget that if you have less days and therefore less volumes compared to the previous year, with the same customer base, you have installed revenues that are more or less fixed while volume revenues go down and therefore you have a mathematical increase of take rate. Number three, if you talk about business, what we see in the business, we basically have no new major effect. As always, competition is evolving and therefore In a business that grows volumes, depending on the market dynamics, in some places we have to reduce price to remain competitive. In another case, actually, we take the opportunity to increase prices on the front book, as we've done recently in a couple of different markets. And most importantly, we continue to work on our customer base, basically in two directions. On the one side, we optimize pricing, including repricing up, where we see situations that are unprofitable, or wherever we see the opportunity to do it, or also the necessity to do it, because schemes, international schemes in particular, but in some cases also national schemes, every once in a while are increasing their prices, and therefore we have to transfer those downstream to the rest of the market, and this is something that we do quite actively. And then there is a second element, which is our continuous effort in upselling, cross-selling our products and services, support take rate as we discussed I think in the past. I think the first line for it is DCC that is becoming more and more visible in our revenues, but also more sophisticated stuff such as merchant financing or actually software that we discussed in the past. So yes, they're going up. I think there are some special effects in the quarter, probably in the coming quarters you will not have those, but actually the business dynamics will continue. Bernardo?

On the disposal, as we say, we constantly review our portfolio, identify assets which are not core, and we sell them. There's nothing huge which is a game changer, but I think it's good housekeeping, and for good order, we have proceeded to close, I think, three transactions in the last six months or so, or since the fall of last year, where we sold EITs. for about, EID is the Danish digital identity business, which we sold to Ion Group for about 90 million euros. We then, this year, I think we sold a very small software business for about 5 million euros. Another one we just recently signed in Denmark, tied to the EID business called E-Box, which was sold for about 30 million euros. We had a 50% take of that. In general, we have a bunch of other smaller assets like this which we keep on disposing just as housekeeping and optimizing our business portfolio. Rate pay is a bigger asset than these in terms of its balance sheet. As we had said in 2022, we believe we don't necessarily need to be the owners of this PMPO business. To the extent we can find it, a better owner the next year for rate pay, we would have done so. That came at a time of increasing rates, which obviously impacts the business, which is a lot of similarities to consumer finance, and it's hard to find this buyer. So what we focused on at rate pay is to restructure the business, have a new management team put in place, and the new management team has very successfully restructured the cost base. It took out about 20% of staff, reduced the cost, is now successfully also renegotiated or set up an SPV vehicle to fund RatePay, and I'm confident we'll be able to off-balance sheet the funding that NextSeat currently provides to RatePay in the not-too-distant future so that RatePay is a better business today than it was two years ago. We're not a for-seller, and we're not in the market trying to sell it today, but at some point in the future, if conditions are right, we would obviously revisit this.

Thank you.

The next question is from Gabriele Venturi from Bacaracro. Please go ahead, sir.

Yes, I wanted to ask, as you already showed in the March increase in this quarter of around 150 basis points, don't you think that the guidance of 50 basis points for the year is a little bit conservative? Thank you.

Good morning, Gabriele. I would love to tell you, yes, it's going to be bigger. The reality is that that's not the case. And it's not the case for the dynamics that I've explained before in the sense that in the coming quarters, we will have the effect of some volume and revenue erosions from the bank situations that we have in Italy in merchant services and some repricing and similar situations that we have outside of Italy in issuing. And both of these elements actually are coming with a material impact on margin, and therefore put some pressure on margin. And on top of it, we also have this unwinding of last year right-sizing of our personal costs And therefore, during the rest of the year, you will have the impact of this that will put some pressure on EBITDA margin. However, as we said, we continue to see growing at least 50 basis points during the year. So we confirm our direction of travel. The dynamics that we are observing are the ones that we were expecting at the beginning of the year.

Thank you.

The next question is from Antonella Frongillo from Intesa San Paolo. Please go ahead, madam.

Yes, good morning, everyone. It's Antonella Frongillo from Intesa. I have three questions all on the financial structure. The first one is on the timing. When should we expect some news on the refinancing of the bond expiring next April? The second one is on the cost of debt. I have seen that they have delivered a very good reduction and congratulations for that. How should we reason going forward considering the upgrade to investment grade, but also the different interest rate environment compared to when you place the outstanding bonds? And lastly, could you remind us that the change of control closes of your outstanding bonds and they pass to assess what is the maximum pre-leveraging level they allow at this stage? Thank you.

Good morning, Antonella. Let me hand over to Bernardo to cover the three questions.

Yeah, thank you. I mean, the first one is going to be easy. When we're going to refinance, we'll announce that it's not today. We continue to monitor the market. I think the point that I was trying to make was that we could if we wanted to today. Now there are no longer, I'd say, the kind of constraints we had as a sub-investment grade issuer in terms of the drafting of the prospectus and so on and so forth, and therefore a limited number of windows that we can access. Now we have a lot more flexibility. and we could go as early as next week or wait for the week after or wait for later in the second quarter or even the latter part of the year. We will go when the market conditions are best for us to optimize our capital structure. So it's an opportunistic approach to funding. It's not something we need to do. We have until midpoint next year, if I remember correctly, for the bond to be reimbursed, and at some point between now and then we'll try and pick the best time do so. We won't wait for the last moment, I guess that's the only thing that I would say. With regards to the cost of debt now, as you correctly noted, we are now benefiting from better credit spread than we used to given our investment grade status, but at the same time rates are now higher than they used to be. I think we will work to mitigate the impact on our cost of debt going forward, but inevitably inevitably given where rates are today compared to where they were in the past, there's a challenge to keep the cost of debt where it is today. However, I don't believe that it's going to be materially different in the context of a group which generates approximately or close to 2 billion euros of EBITDA. Spending a few million euros more or less on the cost of debt is not going to make a material difference to us. That said, I've never seen ever maybe rates will come further down and we'll be successful in keeping the debt cost where it is today. As I said, today it's lower than it was in previous quarters. So, so far we have succeeded. On the change of control clauses, there is no commitment. There's no covenants. Our bonds are already, you know, basically investment-grade-like in terms of covenants. So there's no covenants tied to leverage in that respect. And in terms of change of control clauses, there is a double change of control clause trigger in the sense that in order for the bond to be repayable, not only should there be a change of control defined as someone different from the permitted holders, which are current shareholders that own more than 50% of Nexi, so if someone else other than the sponsors today, shareholders or CDP, gains 50% plus one share, and there is a rating downgrade as a consequence of the change of control, that is what triggers the the reimbursement of the bond. Otherwise, there is no change of control. So it's rather, I'd say, good protection in terms of change of control for next year's issuer.

Thank you. I think by calculating the debt at this stage, you could re-leverage up to five times or even more.

I don't believe that's a scenario that we are currently looking at, Antonella, if I may. Maybe someone else may, but not us. It's not one of the issues we're considering.

I was wondering in relation to the, you know, allowed by the change of control clauses.

Yes.

I understand your point as a manager, but I was wondering

I guess technically, no, I guess technically under the conditions. Yeah, technically under the conditions that Bernardo explained. Yes. Yeah. Thank you.

Thank you very much.

Thank you, Antonella.

The next question is from Adita Budavarapu from Bank of America. Please go ahead.

Hey, good morning, Paolo Bernardo. There's two questions from my side, both on the DAC region. Germany, you mentioned that merchant solutions grew 9% year-on-year. So clearly you're getting some market share there. Could you just talk about the dynamics you're seeing in Germany? What's driving that market share gain and maybe where you're taking that share from? And second question also on Germany of the issuing solutions, you mentioned there was a contract discontinuity. Could you just give some color on the size of that contract and how long that impact should continue?

Good morning, Odit. So let me take both of them. Well, in Germany, we continue to see the dynamics that we had in the previous quarters, and we continue to make progress along the same line. First of all, we are more and more focused on the SME segment, and if you like, as I said before, the mid-corporate, smaller LACA segments, especially in some specific sectors such as grocery markets. This strategy is paying off in terms of market share gains and revenue growth. Interestingly enough, we see a better performance of revenues than what we may see sometimes on volumes also because we have been exiting certain high-volume segments like airlines, for example. that went to competitors, but we decided to exit them because they were basically not profitable at all and with high risk associated with them. So we are giving up low profitability or no profitability volumes and gaining actually highly profitable volumes in the SME segment. Where are we taking this from? In practice, I would say from the local incumbents, from the local players, and you know their names, so I don't need to to mention them, but that's actually normal. We are a challenger in Germany. We behave like a challenger. We go to markets very directly. We don't have specific material partnerships there and therefore we also have a lot of flexibility. We behave in the market and we are capturing all those opportunities and we will continue to do so. By the way, we also have two specific quote-unquote assets or further bullets that we are utilizing here. know that our presence in software in the restaurant vertical with Horderberg that is a nice operation that is market leader or co-leader in that vertical and therefore we are also doing a lot in terms of payment software convergence and we are gradually getting control of CompuTop that is the leader in e-commerce and e-commerce gateway solutions in the market that is allowing us also to accelerate in e-commerce. So it's a 360-degree strategy, but it's really, really focused on the most valuable part of the market, and we are taking value from basically the incumbents. On issuing solutions and sealing DACA, we're actually highlighting this to help you understand the different dynamics, because on the one side, we have a German investment service that's growing by a single digit, and we have the total of the region that is more instead around a single digit, and this is basically a bank that was an historical partner of specifically SIA, in the case where we're processors, not necessarily for the bank directly, but actually for corporate customers that had corporate-branded cars, and the customer, they decided to exit from that business, lost the contracts from that business. So it's not per se a direct customer loss, but it's a business that the customer was doing that has gone somewhere else. And therefore, we've been doing some projects, or actually last year, that has been supporting us last year. But this year now, we have, I think, from end of last year, beginning of this year, the volumes have been migrating out. And therefore, we are highlighting it in the quarter because these negative effects will continue during the rest of the year. But again, let's be careful because we're really talking about low single-digit millions here. that in the big scheme of things are irrelevant, but if you look at the quarter for DACA, clearly can affect year-on-year growth.

Understood. Thank you, Paolo. Thank you.

The next question is from Craig McDowell from J.P. Morgan. Please go ahead, sir.

Hi, good morning. It's Craig McDowell from J.P. Morgan. Thanks for taking my question. Just one for me, please. and it's on the recent WorldPay global payments deal. I'm wondering if you can comment if there's any opportunity either organic or inorganic to you from the closing and integration of this deal. Thank you.

Good morning, Craig. To be honest with you, the simple answer is no, not directly. The reality is that in our geographies, we don't see a lot of WorkPay and you know WorkPay as far as we know them as basically two major area of focus. One is UK where they're present also with SME and direct channels and so on and so forth and then more broadly a global e-commerce now on what some years focus but I think more broadly a global e-commerce and a we're not present in the UK. We don't intend to be present in the UK and We've been offering opportunities in the U.K., but we didn't even really consider deeply. And second, global e-commerce is not really our focus. We're focused on e-commerce a lot, but it's more on local mid-market, SME and mid-market, plus national LACAs going omnichannel. And these are places where we don't see them a lot. Did I answer to your question? Is that the question that you were trying to ask me?

Yeah, that's very clear. Thank you.

Okay. Okay. Thank you.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. For any further questions, please press star and 1 on your telephone. Mr. Bertolotto, there are no more questions registered at this time.

Thank you. So thank you very much. Let's close it here. Thank you for attending this call. I guess the messages are quite clear. I think good start of the year in line with our own plans. And the company very, very focused on driving organically profitable growth and obviously continuously optimizing everything we can from cost base to capital structure to be able to create more and more value for our shareholders. We'll be around in the coming weeks quite a bit. We're next week, I think, in Paris. We'll meet a number of investors. I'm really looking forward to that. And please come back to us anytime for your questions, comments, suggestions. We're always here. Thank you so much. Bye-bye.