Poste Italiane Spa

Good afternoon and welcome to Posse Italiane's first quarter 2025 results conference call. In a few moments, the CEO, Matteo Asante, will take you through some opening remarks, and then the CFO, Camillo Greco, will cover the financials. As usual, after the presentation, we will have a Q&A session where you can ask questions either by phone or to our webcast platform. For any topics we won't be able to cover today, please contact the Investor Relations team. We'll provide any clarifications you might require. So with that, over to you, Matteo.

Good afternoon, everyone. And thank you for joining us today for our Q1 2025 results call. We're pleased to report a very strong start of the year with record first quarter revenues and double-digit year-on-year EBIT growth. These results are yet another demonstration of the solidity of our business model discipline execution, and our continued ability to adapt and grow in a dynamic environment. All business units contributed to a solid 5% year-on-year revenue growth, totaling 3.2 billion euros. This performance was driven by strong net interest income, continued momentum in parcel, strong net inflows in investment products and post-paid services ecosystem growth. On the profitability front, adjusted EBIT came in at $796 million, up 13% year-on-year, with a net profit of $597 million, a remarkable 19% increase compared to the same period last year. Ongoing expense management remains a key focus as we continue to successfully mitigate inflationary impacts while cost increase came from expanding businesses. Our balance sheet remains extremely solid, supporting our recently upgraded dividend policy. Solvency to ratio remains well above 300%, including the dividend accrued on Q1-25 results and the impact of the first 500 million of additional remittance from Postevita to the parent company. As announced, we will pay the balance of our 2024 dividend of around 970 million euros at the end of June. bringing the total dividend for the year to €1.4 billion, equivalent to €1.08 per share. As you know, at the end of March, we signed an agreement to acquire from Vivendi 15% of Thiem ordinary shares, a transaction that is expected to close in Q2 2025, bringing our total stake in Thiem to 24.8% of the voting capital. With this long-term strategic investment, we plan to support the consolidation of the Italian telco market. We are advising on several work, advancing on several work streams to generate synergies over time between Poste Italiane and TIM. We have signed an MOU with TIM for the new MD&O contract expected to start from the beginning of 2026. Let's move to Group Financial Results on slide 4, please. We have posted record first quarter revenues at €3.2 billion, up 5% year-on-year. Adjusted EBIT for the quarter is at 796 million and net profit at 597 million euro, up 13% and 19% respectively. These figures I want to underline are the highest we ever reported in the first quarter. On slide 5, The strong underlying revenue momentum across all our business segments continues into the new year. In mail parcel and distribution, revenue growth was driven by increasing parcel volume. The anticipated decline in mail volume is effectively mitigated through ongoing repricing actions. In financial services, Revenues increased by 6% year-on-year to $1.4 billion, supported by record-level NAI and solid commercial performance. Insurance services delivered strong profitability in both life and protection segments. Revenue rose 11% in the quarter, reflecting higher CSM and risk adjustment released. Postepay's unique and integrated ecosystem for everyday services deliver growth in both revenues and profitability. Payment revenues benefited from an overall increase in card usage by our clients. The telco customer base remains solid and stable, while the number of energy clients has almost doubled year-on-year, reaching around 800,000 clients. Let's move to slide six and EBIT evolution by segments. Mail parcel and distribution reported an adjusted EBIT of $25 million for the quarter in line with our full year guidance. Financial services operating profitability is up 31% to $260 million, driven by record and overall strong revenue trends. Insurance services EBIT is up 9% supported by both life, investment, and protection. Finally, for the pay double-digit, EBIT growth to $133 million is driven by resilient top-line performance and stable cost. Let's move to a more detailed review of our numbers by our CFO, Camilo Greco. Please.

Thank you, Matteo, and good afternoon, everyone. Let's move to slide 8 on May parcel and distribution. Revenues totaled $949 million, up 2% year-on-year. May revenues at $520 million were slightly down by 3%, in line with the trend that we anticipated for our fiscal year 2025 guidance in February. In addition, year-on-year comparison made revenues even favorable this quarter as Q124 benefited from positive one-off items. Let me also remind you that major revenues will benefit from the new OSU pricing from April 2025, with an estimated positive impact on revenues of around $3 million a month. Parcel revenues were up 7% to $393 million, with growth recorded across customer segments. Distribution revenue from other business units are up 4% in the quarter, reflecting positive commercial trends across the group. Adjusted EBIT at 25 million into 125 is well in line with the guidance provided for the full year. Let's look at volumes and tariffs on slide 9. Parcel volumes were up 9%, supported by strong market positioning across all customer segments, with 40% of items now delivered via the postal network. We have also recorded a 70% increase in deliveries to the Punta Posta network, leading to delivery efficiencies both in terms of cost and lower CO2 emissions. Preliminary trends emerging from April numbers show an acceleration of parcel volumes growth versus Q1. Looking at pricing, the average tariff remains broadly stable as the volume growth is spread across all customer segments. Moving to mail. The volume trend is in line with expectations, and preliminary data show an acceleration of registered mail volumes compared to Q125. Finally, the higher mail average tariff to over €1 reflects ongoing repricing actions across both regulated and market products. As already mentioned, the new pricing on regulated products effective from April is expected to generate an additional €3 million revenues per month. Moving to financial services on slide number 10. Gross revenues for the quarter came at $1.7 billion, up 7%. Net interest income came at a record $666 million in Q1, up a strong 13%, benefiting from management yield enhancement actions combined with supportive rates environment. Postal saving distribution fees amounted to $441 million, up 3% year-on-year, supported by improving gross inflows. Consumer loan distribution fees reached 71 million, up 14% versus Q1-24, driven by higher margins. Asset management revenue is resilient at 44 million in Q1, with higher assets under management compensating lower upfront fees. Finally, adjusted EBIT came in at 160 million, reflecting the positive revenue trend. Moving to slide 11. TFA has reached $596 billion, up $5 billion in the three months from the end of 2024. Let's look at each component. We reported strong $1.6 billion net inflows in investment products, reconfirming the positive trend in life insurance, where net inflows reached $0.9 billion, continuing to outperform the market. Deposits were up, benefiting from higher balances from PA clients and resilient retail deposits, stable $58 billion, confirming the stickiness and loyalty of our customer base. Postal savings net outflows were driven by high maturities mitigated by a new commercial initiative. Moving to slide 12, insurance services revenues amounted to $442 million in the quarter, up 11% year-on-year. We continue to have positive net flows into $125 million, supported by Newly launched products and strong commercial efforts continue to outperform the market. Our lapse rate of 8.6% reflects proactive client portfolio rebalancing activities, as also demonstrated by the positive net flows. Let me highlight that in Q1 2025, around 40% of our lapses have been reinvested into new life insurance products. Life investment and pension revenues are up 10% to $450 million in Q1, during buy-hire, CSM, and risk adjustment release. Protection revenues were up a strong 22% in the quarter, supported by higher growth rate and premiums, up 19% to $371 million in Q1, and strong profitability. Let me remind you that Q1 2025 protection numbers are exactly on a like-for-like basis, with no change in perimeter. The combined ratio was 83% in Q1, while we confirmed our fiscal year 2025 guidance to about 85%. Adjusted EBIT of $378 million is up 9% compared to Q1 2024, supported by both life investment and protection. On slide 13, we showed the CSM evolution in the quarter. Normalized CSM growth is strongly positive at 3.6% annualized. up from 2.5% in 2024, with a strong increase in new business value and expected return more than compensating the quarterly release. Group CSM at the end of the quarter is up to $13.6 billion, providing strong visibility on the division's sustainable profitability going forward. Let's look at the solvent tieration evolution of slide 14. Postevita Group Solvency II was 3 or 5% at the end of March 2025, well above the managerial ambition of circa 200% through the cycle. This ratio already embeds 100% remittance of net profits for the period to the parent company, as well as the impact from the first 500 million additional remittance, which will be paid next June. The decline was mainly related to the negative impact from economic variances driven by the increasing rates and BTP spread in the first quarter, while the internal capital generation of the business fully covered for the foreseeable dividend accrued in Q1 2025. The decline in both rates and spreads observed in April resulted in an improvement of our solvency duration that currently stands between 305 and 320 percent. Moving to post-pay services, slide 15. Revenues rose by 5% year-on-year to $398 million in Q1, as our unique everyday ecosystem continues to drive top-line and profitability growth. Payment revenues are resilient to $284 million in the quarter, supported by higher transaction value and growth in total number of ecosystem transactions at 9%, proof of the increase in card usage by our clients. This performance offset the decline in instant payment revenues following recent EU regulatory changes. Total transaction value is up 6% year-on-year, impacted by a tough comparison in Q1-24, who benefited from seasonality. Preliminary transaction value data for April already shows encouraging signs of acceleration versus Q1-25, with 15% transaction value growth. Telco revenues grew 2% in Q1 versus last year, supported by our stable client base and the rollout of our fiber offer. Finally, energy revenues are at $32 million, reflecting positive market trends and a solid customer base evolution, currently standing at around 800,000 clients, twice the Q1 24 base. Adjusted EBIT grew a strong 13% to $133 million in Q1, underpinned by solid top line performance and stable costs. On slide 16, we look at the workforce evolution. Since the end of 2024, the average headcount rose to 120,000, in line with higher FTEs supported in our 2025 target and consistent with business growth. This figure includes approximately 1,200 additional temporary workers engaged during the Q4-24 peak period, when we managed significantly higher volumes compared to the previous year. More importantly, the profitability per FTE continued to improve with the value added per FTE going by 4%, €87,000. HR costs per FTE are up 1% to €47,800 as a result of variable compensation. Moving to group HR costs on slide 17. In Q1, ordinary HR costs increased by 3% to slightly over $1.4 billion due to higher FTEs and variable compensation as already mentioned. In the quarter, ordinary HR costs on revenue was slightly down to 41%. Moving to slide 18. Non-HR costs increased by 62 million year-on-year, mainly driven by 36 million of additional variable costs reflecting higher business volumes, while fixed costs decreased by 3 million. DNA are up 29 million in line with the increasing investments driving our continuous transformation. In general, our focus on cost and capital discipline across all divisions remains laser-sharp, and protecting the bottom-line profitability as well as the cash flow remains our top priority. Thank you for your time. Let me hand over to Matteo for a wrap-up.