The Leading PayTech Redefining Payments in Italy September 2019 1 - - PowerPoint PPT Presentation

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The Leading PayTech

Redefining Payments in Italy

September 2019

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(1) Euromonitor International Consumer Finance 2019 Edition. (2) Eurostat 2015. (3) Based on Total Consumer Spending. (4) Refers to consumer card payments market. (5) 2018 online share of total retail consumption. E-commerce penetration calculated as the ratio between online spending and total spending (online and physical). Online spending includes purchases of products and services, excluding digital-only contents. Total spending is calculated on those categories of products that are sold online but that are also available offline (i.e. excluding cigarettes, gaming, betting etc.). (6) Management estimates.

3.7 .7m

La Largest SM SME po popu pula latio ion in n Eur Europ

• pe(2)

Str trong and resilie ient secu ecular gr growth

Unique stru tructural ch characteristics

26% 26%

Italy ly vs 45% % Wes estern Eur Europe card pa payment pen penetration(1)

+ + ~10% 10%

Italy ly vs. ~6 ~6% % for

• r Wes

estern Eur Europ

• pe(4)

card pa payments tr transaction valu alue 15 15-18 CA CAGR GR(1)

€851bn

2018 2018 Co Cons nsumer spe pend(1)

• SME-domin

inated d and nd main mainly ly ph physic ical l com

• mmerce mar

market

• Unde

nderdevelop

• ped and

nd fas ast t gr grow

• win

ing e-com

• mmerce mar

market (6.5 6.5% pe penetr tratio ion(5))

• Fragmented and

nd ba bank k led d di distr trib ibutio ion (93 93% of f acquir irin ing (6))

• Cou
• untr

try y di digi gitaliz lizatio tion cor

• re for
• r na

natio tional l agenda

#4 #4 La Largest ec econ

• nomy

in in Europe(1,3) One e of

• f th

the e most under erpenetrated card payments markets in in Europe(4)

Note: Selected countries include Western European countries and exclude Turkey and countries with data based on modelled assumptions made by Euromonitor International. Total Consumer Spending is defined as the sum of Card Payment Transactions (Excl Commercial), Cash Transactions, Other Paper Payment Transactions and Electronic Direct/ACH Transactions. This tracks retail purchases, purchases of services, utility payments, rent payments, etc. Excluded transactions include peer-to-peer payments, taxes, fines, loan interest charges, and investments (including real estate). Card Payment Penetration is defined as Card Payment Transactions (Excl Commercial) divided by Total Consumer Spending. Consumer Card Payments is defined as Card Payment Transactions (Excl Commercial).

Ita Italy: Lar Large an and underpenetrated mar arket with ith uniq ique str structural ch characteris istics

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Mer erchant Ser Services s & Solu Solutio ions Mer erchant Ser Services s & Solu Solutio ions Mer erchant Ser Services s & Solu Solutio ions

41m 41m

Payment Cards Managed

€197bn

Value of Transactions

Consum Consumer Ca Cards ds Com Commercia ial l Ca Cards Mo Mobile bile Payments Payment App Apps

Lead Leading the he evolu

• lution towards

ds com

• mpl

plete e dig digital alisa sation

• n of
• f pa

paym yments

Car Cards an and Dig Digital Payments

2.4 .4bn

Number of Transactions

39% 39%

Ne Nexi: i: The le lead adin ing Pay ayTech with ith fu full ll co coverage of

• f th

the pay ayment eco cosystem

Source: Company information. Note: leading Italian PayTech in terms of revenues. (1) 2018 data. (2) Merchant Acquiring and Card Issuing data refer to International Schemes only 2018; Digital Banking solutions shares are based on 2018 data (excl. Clearing based on 2017). (3) Spending Flows through Nexi. Market share calculated as a ratio of Nexi's Net Issuing + Acquiring volumes on Total Market Acquiring volumes, estimated allocating proportionally Other Issuers’ cards volumes among Nexi’s clients and Other

• Merchants. Data refer to International Schemes only (VISA and MC) for 2018.

Bus usines iness s Act Activ ivitie ies Sc Scale ale (1)

1)

Clien lients s Ser Served ved

Di Digital l Ban Banking Solu Solutions s

936m 936m

Number of Clearing Transactions

13.4 .4k

ATMs managed

Ins nstant Payments Self Self Ba Banki nking PSD PSD2 2 & Ope pen n Ba Banki nking Dig igit ital al Cor Corporate Ba Bank nking ing

Dr Driving ng ad adop

• ption
• n of
• f ad

advan vanced ed ba bank nking g so solut lutions ns an and d de devel veloping ng Open pen Ban anking

13% 13% Mer erchant Ser Services s & Solu Solutions a

~8 ~890k

Merchants served

€249bn

Value of Transactions

e-Com Commerce & Invis isib ible le Payments Data-enable led pr prod

• ducts

Lar Large merchants

• mni

ni-channel SME SME solut solutio ions

One ne-stop

• p so

solut lution n pro provide der for

• r mer

ercha hants

• f
• f all

all cat ategories s an and d siz size

48% 48%

3.2 .2bn

Number of Transactions Com

• mprehe

hensi sive po portfolio, lead leading g towards s com

• mplete dig

digit italisa sation of

• f pa

paym yments

~4 ~420k

Corporate Banking Workstations

% of Group Pro-Forma 2018 Revenues

Mer erchant Ser Services s & & Sol Solutio ions

~30 30m Card ardho holders >8 >800 00k SM SMEs Es 15 150 0 Ban anks

~70 ~70% ~60 ~60% 16 16-70% 70% ~90 ~90% (3)

3)

Sh Share are of

• f

Ser Served ved Mark arket (2)

2)

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Ne Nexi: i: The le lead adin ing Pay ayTech re redefin inin ing pay ayments in in Ita Italy

Long term erm, ext xtensive an and valu lue-oriented par partnership ips wit ith It Itali lian ba banks Attractive fin inancial profile combining profitable growth, resilience, operating le leverage and strong cash flo low generation Superior pr products dr driv iving mult ltiple growth op

• pportunit

itie ies Es Established mar arket leader r at t sc scale with ext xtensive pa payments ec ecosystem coverage Str tron

• ng lea

leadership ip tea eam with ith pr proven tr trac ack rec ecord acr across al all l val alue cr creatio ion le levers

1 2 3 4 5 6 7

Leading technology capabil ilities dr driv iving innovation an and Next xt Generation Pla latform de deployment Europe’s most attractive payments market with strong secular growth drivers

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(1) Euromonitor International Consumer Finance 2019 Edition. (2) Economist Intelligence Unit. (3) Refers to consumer card payments market. (4) Consumer card payments CAGR 15-18 by value for Western Europe total and Nordics based on fixed 2018 euro exchange rates and for all other countries based on local currency. Note: Selected countries include Western European countries and exclude Turkey and countries with data based on modelled assumptions made by Euromonitor International. Total Consumer Spending is defined as the sum of Card Payment Transactions (Excl Commercial), Cash Transactions, Other Paper Payment Transactions and Electronic Direct/ACH Transactions. This tracks retail purchases, purchases of services, utility payments, rent payments, etc. Excluded transactions include peer-to-peer payments, taxes, fines, loan interest charges, and investments (including real estate). Card Payment Penetration is defined as Card Payment Transactions (Excl Commercial) divided by Total Consumer Spending. Consumer Card Payments is defined as Card Payment Transactions (Excl Commercial).

Gr Growt wth of

• f Itali

alian car ard pa payments valu alues ou

• utp

tperfor

• rmin

ing Italia ian tot

• tal

l con

• nsumer spe

pendin ing g and and no nomi minal l GDP GDP (1,2)

1

Si Significantly underpenetrated dig igit ital l pay ayments market with ith str strong an and re resi silie lient gro rowth, broadly in independent fro from th the economic cyc cycle

2018 Car Card pa payment pen penetratio ion (% by value)(1)

26% 45% 52% 63% 69%

• W. Europe

21% 21% 42% 42% 49% 49% 58% 58% 62% 62% 2015 ~3 ~3x 2x 2x 9. 9.7% 7% Card Payments CAGR 15-18 by Value(3)(4) 5. 5.6% 6% 6. 6.2% 2% 3. 3.9% 9% 5. 5.9% 9% 80 100 120 140 160 180 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Card Payment Penetration(1) 26% 26% Index as of 100 24% 24% 23% 23% 21% 21% 19% 19% 17% 17% 16% 16% 15% 15% 15% 15% 15% 15% Car ard Paym yments ts Tran ansacti tion

• ns (3)

Nom Nominal l GDP (2) Tot

• tal Con
• nsumer

Spe pendin ing CAGR 2009 2009-2018 2018 CAGR 2015 2015-2018 2018 7.2% 9.7% 1.7% 2.1% 1.0% 1.6%

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Coverin ing Tradit itional l Card Payments Rails… …Relevant Adjacent Digital Services… …and Extended Payment So Solutions

Merchant Processing Advanced POS Solutions Data-Enabled Products Mobile Payments Self Banking Instant Payments PSD2 Gateway & Open Banking B2B & e-invoicing Merchant Acceptance Co-issuing (no credit risk) Card Issuer Processing Engagement Platforms Digital Corporate Banking

Exte tensive pay ayments eco cosystem co coverage exte tendin ing to to dig igit ital l an and te technology so solu lutions

2

Payment Apps SME Software Omni Acceptance Antifraud, disputes and chargebacks POS terminal lifecycle management … …

…

E- Commerce & Invisible Payments

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Lo Long-term, extensiv ive an and valu value-orie iented par artnership ips wit ith 15 150 0 ban anks acr across all all se segments

Sources: Company information (1) In terms of branches.

3 ~150 Banks Over 20,000 branches Covering ~80%

• f the Banking

system(1) La Large na natio ional l Ban Banks Multi- Reg egional Ban Banks Di Digital-native Ban Banks Reg egional Ban Banks “Vertical” Banks In International Ban Banks Nexi valu lue contributio ion to to part partner ba banks

Sc Scale ale Ben enefi fits s / Adv Advan antag ages Payments s Adv Advan anced Kno nowledge Transfer Qual Quality ity of

• f Ser

Servic ice and and Reli eliabili lity Broad ad Rang Range e of

• f

Ser Service Mod

• dels

ls Ex Extensi sive Por

• rtfoli

lio of

• f

Supe Superior Prod

• ducts

s Supp Support to

• Com
• mmercial

al Ac Activity Miss ission ion Criti itical al Ser Services

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Dig Digit ital Ba Banking g Solu

• lutions

Ca Cards & Dig Digital l Payments

Nex Next Gene neratio ion CVM

Mer erchant Ser ervic ices & Solu

• lutions

Omn mniacceptance

Gro Growth Driv Drivers Eme mergin ing Gro Growth Op Oppor

• rtunit

itie ies

Data Enab Enable led Solu lutio ions

A rich rich por

• rtfolio of
• f gro

rowth driv rivers an and emergin ing op

• pportunitie

ies

4

Lar Large Merchant Omn mnic ichannel B2B/C /Corporate Paym yments YAP Mille llennia ials ls Mob

• bile

ile Paym yments ts Mob

• bile

ile Paym yments ts Credit it Full ull Potentia ial l Smar artPOS Digit ital Cor

• rporate

Ban ankin king for

• r Lar

Large-Mid id Self lf Ban ankin ing Debit it evolu

• lutio

ion Cor

• rpor
• rate Car

ards Solu lutio ions Ins nstant Paym yments Solu lutio ions PS PSD2 Gateway & & Ope pen Ban ankin king Merchant App pp E-Commerce & Invis visib ible le Paym yments ts …and for Small/Micro Bus usiness Dual al-sid ided Opp pportunit itie ies

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5 Le

Leading technology capabili lities dri riving in innovation an and Ne Next Generation Pla latform deployment

St Strong investment in te technology capabilit ities. . Bes Best t in cl class s te technology te team combining engineering and advanced digital capabilities

• 356

356 €M invested from H2 2016 to H1 2019

• ~1

~1,500 dedicated resources (in + out)

• 6

6 digital factories

Ca Capabil ilit ities es

• 99.9999% core service

availability in 2018

• No

No data and GDPR breaches

Qu Quality an and Sec Securit ity excell llence as as fou

• undations to grow
• ur business

Qualit lity

• Product portfolio

completely transformed in 2017- 2019

• 3x new IT releases

2018 vs. 2017

St Strong innovatio ion de deliv livery an and com

• mple

lex pr project execution capabilitie ies

In Innovation

Next xt Gen Generation Pla Platform with th mod

• dular, pr

progressive, evolu lutionary ry de deployment enabling competitive advantage via innovation and cost efficiency

• Step by step modular execution
• n going
• 40%

% program spend completed; 180 180 €M capex expected to complete (H2 2019 – c. 2023)

• Further innovation agility, cost

efficiency and operating leverage (e. g. insourcing)

Ne Next xt Gen eneration Pla latf tform

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Source: Company disclosure.

Str Strong an and experie ienced extended Le Leadership ip Team

6

Paolo Bertoluzzo Group CEO

Federico Ferlenghi Operations & Help Line Silvia Beraldo CAO Saverio Tridico Corporate & External Affairs Daniela Bragante Compliance & AML Alessia Carnevale Risk Stefania Gentile Mercury Payments Marco Ferrero Commercial Division Emanuele Boati Audit Roberto Catanzaro Business Development Andrea Mencarini Cards & Digital Payments Enrico Trovati Merchant Services & Solutions Giuseppe Dallona CIO Renato Martini Digital Banking Solutions Bernardo Mingrone Group CFO

350 new talent hired coming from >100 corporates 83% new in Top 100 ~2000 FTEs; ~1000 new vs. 2016

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Unmatched Scale e in in It Italy Str trong Ca Cash Flo low Gen eneration Con Consisten ent t Profitable e Organic ic Growth Proven Oper eratin ing Le Leverage Resili ilient t and Div Diversifie ied Recu currin ing Reven enues €519m €931 931 15.5 .5% 7.8 .8% 47% / / 53% 7.2 .2x 46% 46% 64% 64% 74% 74% €312m 2018 Cash Flow Conversion(4) 2018 Operating Cash Flow (3) 2018 EBITDA Margin Fixed Costs as % of Opex Revenue Split (Volume-Driven / Installed Base) Cards Spend vs. Consumer Spend CAGR ‘09-’18 in Italy 2016-2018 EBITDA CAGR Organic 2016-2018 Revenues CAGR Organic 2018 Pro-Forma EBITDA Incl. Initiatives(2) 2018 Pro-Forma Net Revenues

Source: Company information. (1) Selected financials include Aggregated financials for Net Revenue CAGR, Normalised EBITDA CAGR and Fixed Costs as % of Operating Costs. Selected financials include 2018 Pro-Forma figures for Normalised EBITDA Margin, Normalised Operating Cash Flow and Cash Flow Conversion. (2) Normalised EBITDA incl. impact of Announced Initiatives expected to be fully realised by 2020. (3) Operating cash flow calculated as Normalised EBITDA minus Ordinary Capex and minus Δ Working Capital. (4) Defined as Normalised Operating Cash Flow as % of Normalised PF EBITDA.

Att Attractive fin financia ial pro rofile ile co combin inin ing pro rofitable gro rowth, res resili ilience, op

• peratin

ing le leve verage an and str strong cas cash flo flow gen eneration(1)

7

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20 2019 19 Fin Financia ial l performance so so far far

Mar argin

442 442.1 467 467.3 1H18 1 1H19

5.7%

194 194.1 232 232.9 1H18 1 1H19 20.0 20.0%

Note: (1) Proforma for Group reorganization and OASI / Bassilichi non core disposal

44% 44% 50% 50% 6.9%

Net t Revenues (€M) M)

EBIT ITDA (€M) M)

Underlying growth (excl. run-off of zero-margin HW reselling contracts from acquisitions)

7

• Transfor
• rmatio

ion Co Costs ts: : -60% y/y

• Cap

Capex: 59 €M in H1 2019 (13% of Revenues)

• Norm
• rmali

lized Cash Flow conversion: 80%

• Net

t Fin Financial Deb Debt/EBITDA: ~3.0x expected for FY19

Add ddit itio ional H1 2019 high highlig ights

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Updated Fin Financial l guid idance

Notes: (1) Due to run-off of zero margin HW reselling contracts of acquired businesses (2) Non-recurring items affecting reported EBITDA in 2019, excluding extraordinary IPO/refinancing expenses

Net t Revenues

• 5-7% annual net revenue growth over medium term
• 2019 growth at lower end of range1; growth after 2019 at higher end of the range

EB EBITDA

• 13-16% annual EBITDA growth over medium term. Continued strong operating leverage
• 2019

2019 EBI EBITDA ~500 500 €M M (~+1 (~+18% % y/y y/y).

Cap Capex

• 8-10% ordinary capex as % of net revenues over long term
• Tran

ansformation capex on

• n top
• p of
• f or
• rdi

dinary ry capex of

• f ~1

~180 €M M cumula lativ ive (2H (2H19 – c.2023) )

Cap Capital St Structure & Cap Capital Allo locatio ion

• 2019 ne

net deb debt of

• f ~3.0x EBI

EBITDA. . Organic de-leveraging with target net debt of ~2.0-2.5x EBITDA over mid-long term

• Invest in organic growth; potentially consider accretive and strategically compelling M&A
• Progressive moderate dividend policy, targeting pay-out ratio of 20-30% of distributable profits in mid-long term

Non

• n-recurring

Ite Items

• >60% reduction in non-recurring items in 20192
• Rapid further decrease of non-recurring items affecting reported EBITDA thereafter

7

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Ne Nexi: i: Best pois

• ised to

to cap capture multip iple le ave avenues for for fu future valu value gro rowth

It Italia ian Market St Strong Tail ilwin inds

• One

ne of

• f the

he mos

• st

un underpenetrated car ard pa payments s mar arkets in in Eur Europe

• St

Strong and and resi esilient gr growth

• National Ag

Agenda towards s a a cas ashl hless ss soci society

On Ongoing Gr Growth th Product In Init itia iatives

Broad po portfolio of

• f

pr product ini initiatives s acr across ss all all bu busi siness ss segm segments: s:

• Merchant Servic

ices & & Solu lutio ions

• Car

ards & & Digital l Solu lutio ions

• Digit

ital Ban ankin king Solu

• lutio

tions

Cap Capture Fu Futu ture St Strategic Gr Growth Op Opportunitie ies s

• B2B

B2B / cor

• rporate

pa payments

• Ope

pen ban banking

• Mill

illennials s / mobile ce centric pa payments

• Da

Data pr products s and and pr proposi sitions

Fur Further Mar argin in Ex Expansio ion

• IT strategy
• Ope

perations s transformation

• Continued
• p
• perational

effi ficiencies

1 2 3 4

Potential Loc Local M&A Oppor

• rtunities
• Furt

Further con

• nsolidation
• Valu

alue ch chain exp xpansi sion (e. (e.g. bo books) s)

• Cap

apabilities s en enhancement in in strategic pr product/tech ar areas

5

Pot

• tential

In International M&A Op Opportunities

• International

acq acquisi sitions

• Ac

Actor in in pan pan- Eur European con

• nsolidation

6

• Br

Brea eadth of

• f por

portfoli lio

• Mark

arket en entrenchment

• Fu

Full ll se set t of

• f capabil

ilities

“Future-Ready”

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