Nexi Spa Azioni Ordinarie

Good morning. This is the course called Conference Operator. Welcome and thank you for joining the NEXI First House 2025 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 the telephone. At this time, I would like to turn the conference over to Paolo Bertoluzzo, CEO of NEXI. Please go ahead, sir.

Thank you. Good morning. Good morning to everyone, and welcome to our call for the first half of 2025. As usual, I'm here with Bernardo Migroni, our Deputy GM and CFO, Stefania Mantegatta, who leads our investor relations activities, and a number of colleagues that may provide help in case we want to deep dive on very specific topics. Today I will start by providing a short overview of the progress in the first half and the key messages associated to it. We'll then go over to Bernardo for results and come back for conclusions and most importantly to go with Bernardo to answer to your questions. Let me start on page three of the document with a summary of our key messages. First of all, we continue to deliver profitable growth and I would add strong cash generation. The first half of the year, revenues were up 3.4%, with merchant solutions up close to 4%, but actually growth across all business units and growth across all regions as well. In the first half, EBITDA did grow at 5.2%, with an 88 basis point EBITDA margin expansion, thanks to a combination, obviously, of top-line growth, continued operating leverage, and strong cost control, with OPEX growing in the first half below 2%. And last but not least, and most importantly, I would say, given the strong focus we have on it, in the first half of the year, we'll be generating excess cash for more than €400 million, 407 more specifically, which is well on track to deliver the committed more than €800 million across the full year. Second, certain messages that we continue to shape next year for future profitable growth and the acceleration as we look into the coming years. First of all, we continue to progress on our strategy on integrated payments and software payment integration. As we discussed in the past, our strategy is fully focused on partnering with ISV, with different partnering models, The first half of the year, we did continue to progress in the development of this partnership. We have been adding another 30, 40 partnerships across the region, and we have a fairly good coverage of partners across different regions. In particular, I would focus on the Nordics, where we have a very strong coverage, and the Nordics are particularly relevant for this conversation because that's the region where we see integrated payments having higher relevance versus the rest of our geographies. Second key message, we continue to have strong performance in the Italian complementary channels for SMEs. As a reminder, SMEs is our highest priority in general in the first half of the year. Complementary channels were representing 26% of the new sales up from 20% last year. And the field sales channel, which is the most recent one, we've been developing the triple, the acquisition volumes in the first half of the period. Third key message we continue to see. Strong progress on e-commerce with good customer-based growth, about 5% customer growth across the various geographies. This is very important to us as e-commerce is one of the key pillars of our growth and future acceleration. And last but not least, and this is something that is very important, especially given the dynamics that we've been observing over the last two or three years, We continue to strengthen the relationship with Italian banks that are incredibly important for the Italian region. Here we're mentioning two facts that are really important to give you a clear sense of resilience of our position in Italy. Over the last 12 months, we've been renewing 100% on the contracts that were potentially expiring. And on top of it, we've already renewed the major contracts that that could potentially expire in 2025. Let me mention one. We normally, as you know, don't call out specific customer names or contract relationships, but this one was also into a very specific press release. We've been renewing our relationship with Credit Agricole in Italy, a very successful relationship with Credit Agricole in Italy for both merchant services and and issuing solutions from now up until 2029. Third key message, we continue to create value for our shareholders. As a reminder, across 24 and 25, we're returning to our shareholders 1.1 billion euro as a combination of dividends and buybacks, and we're doing this while having become investment-grade issuer at the same time. In particular, in 2025, we're returning 600 million euros, up 20% versus the previous year. We have paid our very first dividend of 300 million euros in May. And again, as a reminder, we've committed to increase this dividend over time. And we have the share buyback program of a similar size that is ongoing as we speak. Last but not least, in the last quarter, we've also issued our first issuance, actually, as an investment grade player. We've issued 750 million euros of senior unsecured notes, six years with 150 basis points spread, which we believe is quite telling about the outlook of the business. Overall, in this environment, we are confirming our guidance for the full year. Revenues growing low to mid-single digit. EBITDA margin expanding at least 50 basis points. And last but not least, excess cash of at least 800 million euros, starting from the 407 that we have delivered in the first half of the year. Let me now hand over to Bernardo. Thanks, Paolo.

Good morning, everyone. So results for the quarter and first half, I'd say, show a continued and steady progress towards delivering our full-year guidance, as Paolo has just finished with his section. If we look at slide five, we have the breakdown of revenues in the quarter and for the first half. As you see, for the first half, we grow 3.4%. I'd say in the middle of our low to mid-single-digit top-line growth range, In the quarter, there's a slight deceleration, 3%, but broadly speaking, in line with pretty steady and in line with the first quarter of the year. EBITDA margin continues to grow, 34 basis points in the quarter. We are at 88 basis points in the year. Again, our guidance was to do more than 50 basis points for the full year. So I'd say that we are on track for that as well, with EBITDA growing 3.7% in the quarter, and that is just north of 5% for the first half. So I'd say at a consolidated level for the group, a good second quarter in line with our expectations. Moving on to merchant solutions, here we highlight, as usual, the strong contribution to our top-line growth coming from international schemes, which also benefits to some extent from a migration across the regions in which we operate from national schemes where they're present to international schemes. As expected, and we have talked about this a number of times, you know, our underlying volumes and revenues are growing and accelerating to growing more than last year. However, we have the effect that we're working through this year of banks that we had lost a few years ago in terms of distribution capacity. This weighs approximately two percentage points, I would say, in terms of the value of managed transactions. Notwithstanding that, it highlights the resilience and the strength of our business and its ability to grow in the quarter by 3.4% in merchant solutions and close to 4% if you look at it in the first half. We continue to accelerate our growth in SMEs, our core segment. TAC in Poland we call out as e-commerce's core engines of growth for our business, and we continue to grow our business thanks to upselling of value-added services and products to our customer base. We move on to issuing solutions. Some of the similar themes that we highlighted for merchant solutions apply here as well. We have a continued growth of international scheme volumes, outpacing those of national schemes as we move more and more towards those. We have continued success in upselling our international debit product in Italy, which is a key driver for growth in that region, and upselling and cross-selling of value-added services across geographies. Again, growth in the second quarter, I would say, mimics that of the first quarter broadly in line with the full first half number of 2.9%. Nothing really compared to other years, project work, these kind of things are pretty steady phasing throughout the first half of the year, so nothing really to call out also compared to last year. Digital banking solutions, I'd say 2.5% growth in the quarters is quite good given the mainly infrastructural nature of this business, even though in those areas where we benefit from volume growth, we are taking advantage of it, for instance, on instant payments and our partnership with EBA Clearing. We continue in this business unit as well to increase the value of our client base by cross-selling and up-selling value-added services. For instance, here we call out on the instant payments front how we have rolled out verification of payee and anti-fraud features on the instant payment product. If we look at cross-geographies on slide 9, I would say a pretty homogeneous set of numbers for first and second quarter cross-geographies. Italy growing 4%, which is supported again, as we mentioned, in both issuing and acquiring by international scheme volume growth. We have, obviously, in Italy, most of that drag I was referring to in terms of customers, which we lost a few years ago and are now starting to increase. to move away from us. Nordics, I'd say, good revenue performance with 3% top line growth, which is supported in particular, I'd say, by e-commerce growth and the upselling of value-added products and services. In the DACA region, we have strong growth in revenues in merchant solutions in Germany. We call that out at 8% top line. And then we have one issuing processing client, which has been migrating away from us for the last three years or so, which is hitting the top line, which otherwise would be showing the strong growth we're experiencing in Germany in merchant solutions. On the CSE front, we will be lapping, say, the kicking in of a discount, which was embedded in a contract we acquired a number of years ago in Greece. Other than that, I'd say there's solid performance in particular in Poland, which is one, together with Germany, one of the key engines of growth for the group. If we look at the costs and the cost evolution, another, I'd say, good quarter, cost control and commitment to contain growth and costs, 2.3%, 1.6% in the first half. If you look at the nature or if you split the costs by nature between HR costs and non-HR costs, we have the year-on-year comp effect, let's say, on personnel costs. Last year, most of the people that left left around about this time, so we have a year-on-year comparison benefit in the first half, in absolute terms also, obviously. This will unwind in the second quarter, sorry, in the second half. And at the same time, we have some front-loading of project work in the non-HR costs, which actually, again, will unwind in the second half. So broadly speaking, I guess the key takeaway for me is we manage our cost base as we do with our guidance on a full-year basis, and we're highly confident that with... With regards to our overall targets, these are highly achievable, and we remain committed to a second half cost growth, which is pretty much in line with what we saw in the first half, so a strong reduction compared to last year. On the CapEx front, again, we need to speak about seasonality. 180 million euros is just around 10% of revenues in terms of CapEx intensity. We have a sharp reduction compared to the first half of last year. In the second half of last year, we had approximately 250 million euros, if I remember correctly, of CapEx. So there is seasonality, as you would expect, in the second half of the year. We'll expect to have something similar this year, although we remain committed to reducing our CapEx intensity and in absolute terms year on year, as we have discussed in the past. So there is some phasing effect. And I'd say that CAPEX intensity will also come down as well as the absolute value of CAPEX compared to 2024. Slide 12, about reduction of transformation integration costs. On the far left, you see how we continue to reduce the integration transformation costs associated with two very large mergers we completed at the end of 2021 or during 2021. These come down to just under 35 million euros. The overall absolute number is also coming down year-on-year. Clearly, last year, we had a large one-off coming from the downsizing plan from the severance cost, which was 165 million euros. But even if you normalize for that, we expect a full year reduction in this line item, also helping to compound the EBITDA growth and generate incremental cash year-on-year, which we see on slide 13. On slide 13, we have the excess cash generation, so our measure of free cash flow, essentially. We have a target of at least 800 million euros for the year. We are at 407 million. There are seasonality effects here. However, I would expect, I mean, if we feel, Paul and I feel very comfortable with regards to our target of exceeding 800 million euros at this stage of the year and given where we are in the first half. Finally, before I hand the floor back to Paolo, we look at our indebtedness. I think it's important to say that we are 2.7 times EBITDA, having already returned a billion euros. This was on the 30th of June. Today, we're closer to 1.1 billion euros to investors in the form of share buybacks and our first dividend as a listed company, which was paid in May. Had we not done this, clearly, our debt averaging would have been much steeper. We'd be at 2.2 times EBITDA. We're investment-grade, absolutely committed to maintaining this rating, hopefully improving it. And this helps us manage this debt stack very proactively. We issued a $750 million note last May, which was successfully priced, as Paul was suggesting, at the very low end of the pricing range, consistent with a higher rating than ours. And we managed to contain our cost of debt to 2.4%, which is clearly also something which helps us manage this cash flow generation. So, that said, let me hand the floor back to Paolo for his closing remarks.

Paolo Zanonni- Thank you, Bernardo. So, you've seen a fairly, I would say, straightforward set of results. On the back of all of that, we are confirming our guidance for the year. We expect revenue to grow low to mid-single digit for the full year. As a reminder, we have been including into this guidance Two aspects, an underlying growth acceleration versus last year, that was about 5%. However, undermined by a combination of some merchant services effect in Italy on the back of banks, M&A, and other contracts effects coming from two, three years ago. And at the same time, instead of smaller contract renegotiations or terminations across countries, The other geographies for IS. At the same time, we continue to expand margin by at least 50 basis points, thanks to strong cost control, a continuous strong cost control that Bernardo has just mentioned again. And overall for the year, we expect to grow cash by at least 800 million euros for the full year. Let me just recap the three very key messages. Continued delivery of profitable growth. Again, let me stress the excess cash generation continues acceleration. Second point, shaping next year for future profitable growth and re-acceleration. Let me stress again the strengthening of the relationships with the Italian banks with a very successful season of renewals and extensions, including the key contracts that were potentially expiring into 2025. And last but not least, returning value back to shareholders with 1.1 billion euros returned across 25 and 26. Let me pause there and open to your questions.

Excuse me, this is the call school 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 Just InfoSight from UBS. Please go ahead, sir.

Thank you very much, and good morning, Paolo Bernardo. Thank you for having me. So a few here, if I may. First, a couple questions on Italy. So if I look at retail sales, it looks like for the quarter it hit maybe about 1% year over year in Italy per hour math, suggesting there's still a degree of cash-to-card conversion on that and excluding M&A. It seems like maybe you were close to in line with industry growth, but maybe you could just parse through a few of those impacts and tie in the Italy growth and maybe size a bit the M&A impact as we can see the volume, the overall transaction volume growing, I mean around Flattish for the quarter. Secondarily, you mentioned a little bit about new sales channels in Italy. How material is this getting, the direct go-to-market with SMEs? Maybe you could talk about the margin associated with those, meaning clearly you have an incremental cost associated with paying salespeople. Should we still expect this to be EBITDA margin neutral as it becomes more material? Lastly, I wanted to ask, there's been some news around the Dancourt scheme, which operates in Denmark, and the share of transactions going down quite meaningfully. I think from 80 to 40 was one article that I saw. Maybe we just highlight a little bit around what drove that and maybe remind us how you monetize that scheme ownership and understand that functionality is supposed to be improving. Sounds like fees are increasing as well. Should we expect that to hit P&L directly in a positive fashion going forward? Thank you.

Morning, Justin. Let me try to take the three of them. On retail sales in Italy, if you trip out the effect of the couple of, if you like, banks that we've lost two years back and are now migrating, actually, the market, we are growing, we will be growing nicely on volumes and pretty much in line with the with the market. So I think that the cash-to-card conversion in Italy remains fairly healthy, and we see it even more when you look at e-commerce, where the reality is that the vast majority of the customers remains with us, even if the bank would like to migrate them, and they remain with us for obvious reasons of stronger products, stronger support, and all of that. So I would say the net of these couple of banks affects the underlying volume trends remain pretty robust. Clearly, they may be affected by macro, but the reality is that cash-to-card conversion is the main driver here and remains pretty strong. On SME direct sales and so on and so forth, again, as a reminder, We did start adding complementary channels to our bank channels, which remain the most strategic, the most relevant for us, back four years ago, five years ago, with a strong focus on digital channels and retail channels. And more recently, we have started to add, obviously, the ISV channel as well, so the software partners, although that remains very, very low as a relevance in Italy, not just for us, for the entire market. And the real new news is when a year and a half ago, more or less, we did have a more direct sales on the ground as a combination of our own salespeople and sales agents, which is a normal practice in Italy to reach out to SMEs. This is the one that has been driving the acceleration of our performance. They normally target larger SMEs, but also mid-sized SMEs. SMEs. We normally go with our own people on the mid-segment, on the larger and more valuable ones. We go with third-party agents on the smaller ones here. As far as the economics are, sorry, in overall, what is nice is that this has been more than rebalancing the potential lack of distribution from the couple of banks that have been changing a couple of years ago. In terms of margins, it's always a little bit difficult to say, but never forget that, yes, it's true that we need to either have OPEX associated to our people or to pay a new channel, but never forget the fact that as the vast majority of these customers are coming from customers that we had with banks, we were not in any case fully retaining the full revenues, the full price, as we had to leave to the banks a good share of that because it was more of a wholesale relationship with the banks. So for the moment, this is kind of a more neutral effect. Last but not least, as Danforth is concerned, as you know, The local institutions were obliged to go on the topic of Dancourt in opening Dancourt to a multi-acquiring approach because to make it consistent with European regulation, there's been a very constructive and long conversation across the ecosystem with merchants involved, banks involved, ourselves and other players involved in We believe that the outcome is ultimately a balanced outcome, where on the one side, there will be, over time, more acquirers into the market. Over time means that I think this is going to be applicable towards the end of next year, I think, or two years from now. I think two years from now, so there is a lot of time before it happens. But the reality is that we're also gaining much more flexibility and economic support on the running of these teams, which is considered locally a pretty relevant national asset and a key asset from the merchants that support it heavily. I think that all-in, this can be a positive evolution. As far as the volume dynamics that you observe with national schemes, not just Anchor, losing value to international schemes, I just remind the fact that a little bit across all geographies, including Denmark, Despite the fact that we are owners of the scheme, the migration is normally net positive for us. So in general, we are obviously working on this evolution in Denmark, but we see it as neutral to positive. Great. Thank you so much.

The next question is from Josh Levine, Autonomous Research. Please go ahead, sir.

Good morning. Two questions for me. One of your largest competitors has been in the news, not in a good way, and is struggling to turn around the company. Has that created any opportunities or might it create any opportunities for Nexi? And then, Pablo, you had mentioned the acceleration and growth. You've mentioned that before. Can you maybe give us a sense of how much, roughly, we might be talking about and over what time frame? Thank you.

Good morning, Josh. Thank you for your questions. On the first one, in general, I try to capture all possible opportunities offered by the markets, including ones offered by competitors as well. In general, we see good traction in conversations with let's say counterparts that are longer-term focused and really focused on resilience, stability, and again, longer-term outlook of growth. And this normally has to do with banking partners, ISV partners, I would say very large corporates, but also people and talent. This is clearly an area of focus for us. As far as, well, actually, when you talk about smaller SMEs or individual customers, they're really not focused on these type of things. They're pretty much distracted by their own business as it is normal. Talking about acceleration here, I really want to be very, very clear and consistent with everything we've said in the past. As you can easily understand from our first half performance being ahead, materially ahead of our full year guidance, in the second half of the year we expect to see a softer top line growth and as a consequence also a bit of margin expansion. So we're just confirming our guidance. And this has to do with the fact that while we continue to see underlying growth and a little bit of acceleration as well, In the second half of the year, we will see also a more material impact of these bank migrations that combine themselves or, if you like, contract renegotiations. And this is absolutely in line with what we said in the past. As we look forward, we have been starting, obviously, our work on the budget for next year and also a refresh on our longer-term plan. For now, what we see is a gradual acceleration into 2026, and most importantly, the coming years, is a combination of continued underlying growth acceleration driven by mostly, I would say, our growth engine and the resilience of our very large cash engines starting from Italy, but at the same time, a softening of the impact of these technologies. bank contract renegotiations or, in a couple of cases, losses. So that's the dynamic that we expect to see.

Very helpful. Thank you.

The next question is from Gregoire Herman of Berkeley. Please, go ahead.

Good morning, everyone. A few questions for me, please. The first one, given that we are now more than halfway into 2025, can you comment on 2026 and based on the contracts that you have renewed and what you still have in the pipeline, how confident are you that we are going to see the growth acceleration that consensus expects? And then maybe just trying to understand the facing for the rest of the year. I think you guided initially as a relatively strong Q1 and then Q2 to Q4 being slightly lower than Q1. And especially due to this Italy M&A impact that you called out. I think you already mentioned some M&A impact in Italy in Q4 last year. So why shouldn't we expect sort of a pickup in Q4 as this effect should be partly over? And then last question on your growth and especially in Italy. Can you please impact what's the growth attributable to integrated software payments offering versus point of sales terminal, please? Thank you.

Good morning, Gregoire.

So, 2026, we'll talk about it, obviously, in March when we talk about guidance for the new year. But we see potential for re-exceleration, I think, as we've commented in the past, and we confirm it. Again, the work is ongoing. We just started giving to the rest of the team the targets for next year. But the dynamic that we expect to see is the one that I just mentioned in my previous answer, which is on the one side, further acceleration of our ultimately growth engines, namely, I would say, the DAC region, Germany in particular, and e-commerce. At the same time, a continued resilient performance of Italy. And in parallel, a softening of the impact of these bank contracts that were lost or renegotiated with discounts over the last, I would say, ultimately in 23 and 24. So that's the dynamic that we see. So at the moment, that's what we expect. In the second half of 2025, I don't remember exactly what was the effect of last year, last quarter, but I think it was pretty small. The fact that instead we'll be impacting the second half is actually the peaking, I would say, of the effects of basically the known banks' losses, I would say, in Italy and the kicking in of some of the discounts that we had to give in the renegotiation on IS contracts from the past. So it's more of a phasing effect of the different dynamics rather than anything else. And at the moment we don't see any new news from where we were when we provided the guidance for the year back in March. Last question was, if I understand it properly, Gregoire, on the impact of the ISV channel in Italy. To be honest with you, as we've said many, many times, ISVs are very marginal in Italy at the moment in terms of dynamics here. Nevertheless, we've been rushing to cover as many as possible, and we have a nice set of pretty strong strategic partnerships, and here we are preparing for the future more than ever. really in terms of proposition integration, in terms of support, in terms of business model definition, while at the moment there is still limited commercial activity because there is still limited demand from the market. At the same time, we work a lot with all possible type of partners that are more, if you like, distributors rather than real software providers that that are integrating software and payments. And we have a number of examples of local situations being very nice and quite effective, but I can't really define them as true ISVs. But again, we really focus on this also in Italy because over time this becomes more relevant and we want to be fully ready for it.

Thanks very much.

The next question is from Sebastian. Yes, hello everyone, and thanks for taking my question.

Could you please provide some colors on volume trends since the start of the quarter? Have you seen any specific change in market dynamics over the past few weeks, given the uncertain macro conditions? Your European peers' borderline was blaming some tougher market conditions in June. Just curious about the dynamics since the start of the quarter. And the second one, you have renewed a lot of contracts recently. I just wanted to know, do you have any big contract renewal that is coming for 2026? Just to understand a little bit the downside risk for 2026. Thank you.

Good morning, Sebastian. Listen, on volume trends, we have nothing remarkable to be mentioned at this stage. July is just finishing and we still need to fully understand the numbers. Never forget that for our region, for our geographical footprint, August is the real month that basically shapes somehow the summer because that's really the holiday month. We continue to see Pretty resilient strong trends on typical, if you like, grocery channels and in general non-discretionary. I think on discretionary spending, it really depends a little bit on the various geographies. Maybe a bit softer than non-discretionary spending is. However, never forget that the trends are affected by a number of things, the weekends, the weather. For now, we feel comfortable with the guidance we've given, and there is nothing really major to be pointed out in terms of dynamics. Again, never forget that instead you will continue to see, for next year at least, some volume slowdown in Italy that is driven by the bank contracts that we've been discussing here. few times already in this call that were known and budgeted and embedded already into the guidance. As far as big contracts into next year, we do not have major ones, but this does not mean that we don't decide together with customers to anticipate certain renewals simply to make sure that we stand in advance of the future contracts as well. It really depends. but for now, no, we don't see anything major. Never forget that when you have hundreds of bank relationships, some of them are more material, some of them are less material, and therefore you negotiate that basically every day. But at the moment, we don't see in the coming months and quarters anything major coming up.

If I may jump in, Sebastian, I think you mentioned in your remarks, and I was just thinking back to Josh's question about the world line situation or our unnamed competitor, I think it was. Has it helped us or not? I think one of our key partners in Italy, French Bank, announced recently that we had renewed and extended our partnership with them here, and maybe we were helped by the situation, but probably it's got to do with the value of our relationship with them, the longstanding, the quality of the relationship there. But in general, I mean, I think that would be the one that we discussed in the past as one of the renewals that we were interested in, and that's happened.

Okay, thank you.

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

Great, thank you. Good morning, Paolo. Good morning, Bernardo. The two for me, firstly, just on that last point, you talked about sort of current agricole. When you look at sort of some of your competitors like Worldline, as you look outside of your kind of key home markets, and I'm talking now specifically kind of France, maybe Benelux, what's the kind of opportunities you see across both the merchant portfolio and the sort of issuing side? to sort of potentially kind of take on more volume and more contracts over the medium term? And secondly, just as we think of the issuing business of cards and digital payments, I know you've got some headwinds right now, but sort of over the medium term, is this sort of a GDP business, net of sort of price concessions, or do you believe you can sort of outperform that? And if that is the case, you know, what would be needed to kind of grow above GDP there? Thank you.

Good morning, Mo.

Listen, on your first point, honestly, we stick to our strategy and our focus a little bit also independently from the shorter-term dynamics that competitors may have, and hopefully they will also recover from it. And therefore, we stay focused on our geographies, and we stay focused on our also priorities within those geographies. From this point of view, Benelux and France have never been priorities for us, given the portfolio we currently have with a number of chances to enter Benelux. we never decided to capture them for a number of reasons. And similarly, France is a market where it is not obvious how to have value-creating entrants. Never forget that if you're talking about merchant services, it's very difficult to roll out Greenfield in a very profitable way at scale. I think given our scale and the many very important priorities for growth that we have, we really try to stay So, at the moment, we are not putting a new or specific focus in those two geographies. Obviously, if relevant, highly, very creating opportunities will come. We will consider them, but we will not change our strategy because of the current situation with competition. On the issue in business, we have a bit more of a more optimistic view than just GDP. And obviously, phasing depends on a number of things. But we see this business, as you correctly mentioned, on the one side being affected by contract renegotiations and all of that. At the same time, we see it also as a resilient business because Banks tend to be quite loyal here. Migrations are not an obvious thing in this space. And actually, we see volumes growth affecting also this space, positive volume growth affecting also this space. And most importantly, we see the opportunity in the coming years to export more and more the Italian model, that is the licensing model, as we call it, where it's a Nexi product being more distributed by banks rather than Nexi being a technology provider to banks only, and that's a much richer product with a lot of higher upside. Therefore, we see these more as a GDP plus type of business. Not as, I think, with the same potential of merchant services for a number of reasons, but not necessarily a low single digit only business and again sorry as a reminder you also have some effects from one specific bank a loss back two years ago that will touch us over the next couple of years but again underlying net of this very specific effect we see this as a GDP plus business that's great thank you

The next question is from Alexander Fuhr from BNP Paribas XA. Please go ahead.

Good morning. Thanks for letting me on. A couple of questions. One, maybe more for Bernardo, just going through the free cash flow bridge. I think, Bernardo, you called out CapEx phasing as we think of the second half. I thought in H1 working cap outflows were a bit on the high side, the other item as well. So just wondering how you should think of those in H2 and also severances were probably quite a bit lower than what we expected. So, you know, is it the sort of run rate we should expect for the second half and for 2026? And then my other question is, Something you mentioned in the press release around the Klaner partnership having good traction in the Nordics and Germany was hoping you could elaborate on this a little bit. Is it mostly volume-led? Is it unit economics? That could be a bit richer in the venue partnership. Just any color you could shed would be super helpful. Thank you.

Alex, so on cash flow, as we saw even last year, there is some seasonality effect in cash flow coming from, firstly, clearly EBITDA, which is expected to, you know, the second half of the year tends to be heavier than the first half. Then we have, you know, how taxes play out in this, how interest payments play out in this, and lastly, you know, the phasing of CAPEX and non-recurring items. So all of these together, I think, if you look at the first half, the CapEx number, as I mentioned, is going to be heavier in the second half. But not all P&L CapEx is cash flow, right? So if you get an invoice, you book it in December, but maybe the cash goes out last year. And hence, the impact of CapEx might be counterbalanced by networking capital. And believe me, we do... We do our best to make sure that it's managed as effectively and efficiently as possible. The same goes with non-recurring items. Specifically, with severance, you're right. I mean, we guided through more or less half of the cash cost of severance last year and the other half being spread over 25, 26. Now, this isn't an exact science, but that would mean that we would have more than the annualization of the $7.5 million we had in the first half and the second half. I mean, we confirmed... Broadly speaking, this phasing, but can I say it's going to be exactly a quarter of the total that we booked in the P&L last year on cash basis expenses, second half, or in the full year 25. It might be a few million better or worse, but broadly speaking, that's right. Ultimately, what I want to just underline is that being where we are, $407 million this time of year, considering all these phasing effects and the levers we have to pull, in the second half in terms of working capital, in terms of how we manage CapEx, how we manage non-recurring items, how we manage all the P&L, including interest expense, is a position where we feel very comfortable in terms of managing the delivery of the at least $800 million cash flow for the year.

As far as, instead, Klarna is concerned, In general, we have signed a broader partnership agreement with them, which basically entails geographical expansion, also beyond the Nordics, is a group-wide deal. The rollout of new functionalities and capabilities from Klarna, and also new economics that, in the context of all of this, are important. somehow more favorable than the previous ones for Nexi. We're pretty happy. As we mentioned several times in the past, we see by now pay later as a product that we don't own. It's not our business, but we are very keen to distribute an offer to our merchants because it is a valuable product for them, and we're very happy to partner with Klarna in this space. Today, we will be calling out the Nordics in particular because this is, by now, particularly developed in those geographies, and we have a strong position as customer base in those geographies, but over time, this will become more relevant also elsewhere.

Got it. Thank you.

The next question is from Noshin Nejati. of Deutsche Bank. Please go ahead.

Hi, good morning. Thanks for taking my question. Maybe one for Bernardo. You mentioned approximately two percentage point pressure on the value of managed transactions, MS, for the loss of bank contracts. I was wondering what you expect for the next quarter's year and if you can quantify this in terms of net revenues. Thank you.

I can tell you I'm not going to comment on the impact on net revenues. We don't want to give out this kind of information in terms of profitability, individual clients, et cetera. I mean, more or less 2% in the quarter. I would say this, you know, it is probably going to accelerate a bit. Obviously, we'll do our best to make sure it's as mitigated as possible. I mean, the flip side of this is it will have, you know, if we – mitigated. So there's a slower, let's say, outflow of these clients. It's better for us from a cash perspective, from an MPV perspective, but it makes these kind of calls long, you know, we kind of repeat it over and over. But I would expect that 2% to be broadly the same, maybe accelerating in the coming quarters.

So what measures do you take to mitigate, actually?

We do our best to try and retain clients, win them back. I mean, Paul, if you want to comment, we had the call on, we had the question on the

Nishima, good morning. Nishima, the dynamic, here you have two dynamics. You have certain, and this is typical of our industry, it's not just Nexi. There are situations where you're just a technical provider, therefore at some point you have to migrate, and this is the case, for example, for some issuing contracts. While in merchant services, in this specific case, these customers have also a relationship with Nexi, the product is technically an exit product as well, and therefore we fight on the market, also thanks to our new sales channels, to retain as many customers as possible. And that's the reason why the bank tries to migrate the customers back to them. So it's a competitive dynamic that is happening, and therefore it is not a one-off situation. migration happening on a certain day of every customer is something that is happening on a day-by-day basis. As Bernardo was suggesting, the final impact will depend on how this dynamic unfolds over the next several months, actually, because this is not just at the end of this year.

Thank you. The next question is from Adita Budabarapu from Bank of America. Please go ahead.

Hey, good morning, Paolo Bernardo. Thanks for taking my question. So a couple for me. So firstly, just on the OPEX growth for H2, Bernardo, maybe could you just comment on some of the any moving parts there? Of course, last year you had the benefit of the personal cost, but if you could offer any color on H2 this year. A second question, you became an acquirer for the Vero wallet earlier this year, and I think the plan was to roll that out in Germany from the middle of the year. So if you could give any update on how that rollout is going, that would be quite useful. And the final one, merchant services, again, you saw a small improvement in the take rate in Q2. Any comment there on maybe what's driving that?

Just take the first and the last one, maybe. And the last one first, I mean, I think when we're trying to measure the hundredth of a basis point improvement in take rate, I think it's false precision. I'd like to say that there is, you know, strategy behind it, et cetera, but the truth is it has take rate, as we measured, is too coarse to measure. to be that accurate. I think in general, we try to make the point that we, through value-added services and products, we upsell and cross-sell to our customer base. We try to offset margin pressure coming from competition, renegotiation of clients, et cetera. And historically, we've been, I would say, successful in doing so and defending the take rate, maybe slightly increasing it, but it's impossible to comment on a quarterly basis on this level of detail. I think the good news is that it's stable or slightly improving most of the time. On personnel costs, again, we have, you know, we had, you know, about 1,000 people gross of new hires, et cetera, leave during the course of 2024. Mostly, I'd say the weighted average is most of this happening around about this time of last year, and hence the year-on-year comp effect I was speaking of in the first half, which reverses in the second half, where we have, you know, return to normal kind of impacts coming from, I don't know, wage drift, new hires, et cetera, on the personnel costs, which are significant. You know, budgeted for expected and embedded in our expectation that overall for the year we have that reduction I spoke of from compared to that just under 3% growth last year expected to be materially lower this year. And, you know, the inversion in the second half of the trend we've seen in personnel costs is offset by an inversion in the trend that we've seen in the non-HR costs. And I would say there's a bunch of things that we're doing. There's no individual one item that causes this, but as I was mentioning, there's some timing effects. So we had some more intense project work in the first half. This corresponds, project work tends to be a bit more revenues, a bit more costs, and a bit less of that in the second half. So that impacts on HR costs. But also, for instance, we're closing projects. The second largest data center in the second half of this year in Italy here. No, last year we closed the biggest one. This is the second biggest one. And this will help us in the second half of this year. So all of this, you know, we embed into our guidance, you know, at the beginning of the year, and we guide through yearly performance on revenues and margins and therefore on costs and EBITDA. And as I said, we are highly confident with regards to the full year performance and the second half being in line with the first. Paolo on Wiro.

On Wiro, good morning. On Wiro, again, as we discussed in the past, we are happy to support any alternative payment method that becomes relevant for our markets and most importantly for our customers, for the merchants. Wiro, if you like, is now a special one because we are also one of the founding shareholders of Wiro together with a number of European banks. As we speak today, we are working to enable WIRO in the one geography that is relevant to us for now, which is Germany, because so far the geographies that are affected to this are more Benelux and France, and now Germany is coming on top of them. For now, the proposition has been more on a person-to-person, person-to-professional somehow, basically an app-to-app type of thing. It will land instead on merchants more towards the end of the year on e-commerce. And that's where our focus is. So we're working to enable e-commerce acceptance for Wiro on larger merchants, the ones that are at this stage more interested into this. And then we'll see how it evolves. But again, as we go forward, we'll support Wiro. the majority of these alternative payment methods as they become important, and actually we believe that over time we will become important.

I understand. Thank you.

The next question is from Gabriele Venturi of Bank Acros. Please go ahead.

Good morning. Thanks for taking my question. I have two questions. The first one, if you think that the current work-life situation could imply a market share gain for you. And the second one, if you can leave us some color on renewal of partnership if current renewals are done at conditions that are better or worse than in the past for you. Thank you.

Good morning, Gabriele.

Listen, I think on our French competitor situation, we've been already commenting. I think, first of all, maybe it sounds strange, but we really hope and trust that we'll recover very fast from the few topics that are affecting them because I think it's good for the industry and ultimately also for us. Say that we already commented. We see More interest in Mexico, let me put it that way. From, if you like, the counterparts that are more long-term oriented and where ultimately the resilience, the long-term credibility and growth is relevant. Of course, we have interesting conversations with large customers, banks, partners, and also, in some cases, people as well. As far as the renewals are concerned, when you do these renewals, it's quite normal that you provide an incentive that, never forget, is on top of growing volumes. So when you get to the moment of the renewal, you may have a shorter-term hit, but then as volume continues to grow, it is well recovered in general. We're pretty happy with the long list of renewals that we've been able to successfully complete over the last 24 months, and as I mentioned before, also cover the major ones that could have been aspiring this year.

Thank you.

Mr. Bertoluzzo, there are no more questions registered at this time.

Thank you. Thank you very much. Thank you for attending our call. My last, if you like, comment, I understand that you have a lot of curiosity and interest in understanding the short-term dynamics of volumes of the quarters this summer and so on and so forth. We are obviously very focused on that ourselves, so we fully understand it. At the same time, I really want to make sure that the main focus remains on the fact that we are confirming the guidance for this year. and navigating through this year and most importantly building the basis for the acceleration into the coming years as also in 2025 we will deliver a stronger cash generation and higher cash generation versus what we've done last year, materially higher versus what we've done last year. Let us stop here. Thank you very much for your attendance and enjoy the summer break. Thank you. Bye-bye.