Fintiba GmbH (CHG) Earnings Call Transcript & Summary

Good day, and a warm welcome to today's virtual roundtable of the CHAPTERS Group AG. We are pleased to welcome the CEO, Jan-Hendrik Mohr and Bastian Krieghoff as the Group Executive Financial Technologies. Dear participants, you are about to receive information regarding today's corporate release of the CHAPTERS Group. [Operator Instructions] And with that said, I will hand the floor over to Jan-Hendrik Mohr. Jan, this stage is yours.

Thank you very much, everybody, for joining in, and thank you, Iqbal, for giving us the stage here. This is a bit of an unusual setting. It's the first time we do such a format, but it's also a bit of an unusual day. So here, you see our segmentation. That's the format that we've used this year for our Investor Relations presentations and is also the format that you will see in our annual report and how we segment the business going forward. So most of you in the conversations we are having, we would usually focus on the on the vertical market software part of the group in our public sector and enterprise segments where our platforms acquire and run small software companies and mission-critical niches. We've scaled that business to 8 European countries and have a really bright future in allocating more both in inorganic and organic growth. So a lot of our conversation has been on that. But I also know that in all of our conversations, we usually, in the last 5 minutes of the call, touched upon, there's one business that we've had in the group for a long time, Fintiba, and we explained a little bit about it and think what you took away from those conversations is that we own a stake in a real gem of a business, but that has been historically a small part of the story, and the software business has been very dominant. Now with today's announcement that you've seen in the morning, that picture is changing a small bit, and we want to explain to you what the consequences are and why we are excited about that. So we announced in the morning that we will contribute our stake in Fintiba and Coracle with a business called Expatrio into a new holding company. And you might have seen the pie charts up there change a little bit. That means that, that segment actually becomes quite a bit bigger, and is about 1/3 of our overall revenue at this point. And we want to take the time to explain to you why. Why do we think that's a good idea? And what are we doing here? So let me take you on a bit of a journey of how we thought about this segment historically and a bit of context is needed. So in May 2021, we had an opportunity, Bastian approached us, and we were able to acquire a stake in Fintiba in a secondary transaction. We bought out angel investors of Fintiba and acquired a 21.5% stake at the time. And the reason we got interested is that Bastian had a fascinating idea. He wanted to in-source the banking and payment function of Fintiba. So when you look at the Fintiba business model, it's an online platform where people who need blocked accounts for visa in Germany, can obtain that visa in a very seamless and digital process and get all the financial payments and banking infrastructure provided. And historically, that was done with a banking partner that has been a good partner, but there are a lot of potentials that you can create more customer value if you actually control the banking value chain. So Bastian approached us and said, well, I'm looking for someone who takes a stake in our business and who can also help us set up our own bank. And at CHAPTERS Group, we are very entrepreneurial. We like these things. And so we said, well, that sounds really interesting. And let's see what we can build here. So the journey progresses. We actually end up increasing our investment in Fintiba a bit more over time and start in October 2022, our joint venture project of Frankfurt International Bank, and Bastian will touch upon later a little bit more what that is. But CHAPTERS actually becomes a joint venture partner in a bank. And 2 years later, in the September of last year, that bank gets a full banking license. And in that course, we also end up acquiring the majority stake of Fintiba. So kind of the story of Fintiba and CHAPTERS Group has been a story of growth and our engagement towards Fintiba has grown and really based on phenomenal operating performance. So when we originally made the investment, the profitability of the business was solid. Fintiba's always made a lot of money, the amount of venture capital Bastian had to raise to scale the business has been embarrassingly low. It's been always a very, very profitable business. But through the increase in interest rates, after 2022, the business became very, very profitable. And over time, we used that to increase our ownership. Now over time and with kind of Bastian educating us about the vertical, we helped Fintiba build an ecosystem around their core business. So the bank, I touched upon that. So made an acquisition of a business called Coracle. The Coracle is a historical competitor of Fintiba and very strong in certain markets, and they joined the family in December of last year. And now today, the announcement that one of the major competitors, Expatrio is joining our group. And I think what you should take away from this is the kind of timeframe and the patience we have in developing this ecosystem and how this pays off over time because where we are today was clearly not visible when we made our first investment in 2021. And where are we today? What are we actually talking about with the new merged group? So the numbers you see here are the pro forma segment revenues. So when we talk about this segment, we talk about the Financial Technologies segment, consistent with what we will report in our annual report. And the chart we show here is essentially a pro forma view of the current scope of the group. So what we do for the fiscal year 2024, fiscal year '23 and '22, we assume that the 3 companies that are part of the segment today, Coracle, Expatrio and Fintiba, are part of that group for the entire period to kind of give you a view on what are we looking here? How does this business look like? And what you see, obviously, is very strong growth. So the sum of the 3 businesses over the last couple of years has enjoyed very strong growth that is really driven by 2 factors. So on the one hand, the profitability in that market increased due to increasing interest rates. So that clearly has been a driver. But also the number of students into Germany and the cross-selling opportunities have really played out and there's been very strong volume growth in these businesses. That's also prevailing in 2025. So 2025, obviously, with the transaction announced today, and there is time until closing, and we will need time to integrate, 2025 will most likely look like a bit of a normal year in which the businesses operate almost as on a stand-alone basis. And then we are driving some of the strategic initiatives where we want to improve the group. We will use policy deployment, of which Fintiba has been a strong pioneer at CHAPTERS Group to kind of think about what's the strategic plan to how we want to develop these 3 businesses. And what we found out in diligence is that there are very substantial synergies that we think we can reap both on the revenue and on the cost side. And you really need to think about the 3 businesses as 3 identical infrastructures, different size, different complexity but really doing very much the same thing, but maintaining different marketing and different IT teams and different platforms. And this is a real growth story. So this is not about cutting costs and creating synergies that way, but the opportunities to build more products and the opportunities to cross-sell with the resources that we have are vast. And we have a pretty clear thesis on how we want to drive the efficiency of the business without necessarily cutting a lot of costs, but really by refocusing the resources and instead of having the 3 businesses fight each other, make sure that we can serve customers better. Now we don't disclose the EBITDA of the segment at this point. But what we can share is that all the incremental revenues that are coming in with -- both with the combination and then eventually with the synergies are likely going to be at a very -- a significantly higher average margin level than where CHAPTERS Group is at right now. And so we think there is a kind of a strong increment in margin coming out of that initiative. And we feel that this is not like a hay fire and like a 1-year initiative, but we actually think there's a very strong and long-term growth in this industry, and Bastian will tell a little bit more about the qualitative drivers here. Now we want to share a bit more information about what we actually did here in terms of the transaction. And I want to be mindful that there are some elements where we are bound by confidentiality. So we can't talk about everything here. But we share some information that we think is useful for your understanding of the deal structure. Now first, I want to point you to the right side of the slide. This is a comparison to give you an idea of the scope of the transaction. So the 2 bar charts show you the pro forma revenue of the Financial Technologies segment. The left bar chart, the EUR 17 million, the scope of the 2024 revenues of Coracle and Fintiba, bear in mind, we only acquired Coracle in December. So that number kind of includes the full annual run rate, assuming Coracle was part of the group for the entire year. And you see that with the transaction today, that segment -- just a pure scope of that segment is substantially increasing. And what used to be -- about a little bit more than 10% of the group's revenue is now becoming a more significant part of the group. And again, as I said, the overall incremental margins here and all the growth that you're seeing, it's fair to assume that the incremental margins are higher than the average margins that we see at Fintiba, and these are profitable businesses and what we want to build here is sustainable and long-term profitability. Don't overstretch it, but make a running operation that is able to invest into growth and continue to grow for a very long time. Now the way we structured the transaction is unique. It's essentially a merger of Fintiba and Expatrio, and we are really proud that the management team of Expatrio, who we got to know quite well over the last 2 years, will continue to stay and also have a substantial stake in the business. So CHAPTERS Group in the pro forma view will own an increased share of the group, and the way we got there is that we use some fixed income financing in that transaction. So specifically, what you see here is the capital stack of the segment post transaction. So right now, the business has EUR 116 million of net debt. And I'm going to walk you through the different components of that. So there is a small cash portion, which is needed to run the operations of the business included in here, and I'm going to walk you through kind of the seniority of the debt. So at the very bottom, you see the EUR 18 million of CHAPTERS shareholder loans that's a financing structure. You see a lot within CHAPTERS where one of our platforms, and I think it's fair to speak about what we're building here as a platform, would get funding from the top co from CHAPTERS Group AG by way of a shareholder loan. We also did this here as part of the transaction. So there is an EUR 18 million shareholder loan coming in from CHAPTERS Group. Now obviously, on a consolidated basis, that's not external debt to us. But when you -- right now, this is a view on the segment, and to the segment, it is external financing. We had a very substantial part of the capital stack as mezzanine debt, and that debt has very low financial covenants. It's going to be repaid, but it has a lot of flexibility on how we repay it. So essentially, the interest accrues and we are committed to use a substantial portion of the free cash flow generation of the business to pay down that mezzanine debt with interest, but it's not a very strict part of financing. So if there is a weaker year in the business, it doesn't get us into too much trouble. And also if there is a very strong year, we have a lot of flexibility around paying down that mezzanine debt quicker. There is also a layer of senior unsecured financing. Those are vendor loans provided by sellers where we are paying some of -- the segment is paying some of the purchase considerations at a later point. And there is a layer of senior secured debt coming from a financing partner, and that's probably the part of the capital stack that is most similar to how you would normally look at net debt. So that part is secured and has financial covenants. We'll pay that down over the next 5 years and it's very vanilla type of debt financing. We feel very comfortable with that structure, not only on the -- based on the current profitability but also looking into next year. And in particular, reflecting on the flexibility we have with the debt, we feel that it's a level of financial leverage that we can live with, and that is not constraining us too much in terms of flexibility. At the same time, the interest rate we pay on the debt is slightly above 8% on a blended basis, looking at all the external debt apart from the shareholder loan, which is -- benchmarks well with similar financings in particular, given the flexibility that we have here. So when we go on the next slide, this is what we did from a structural measure. So we used to own 55% of Fintiba with management team and one angel investor owning 45%. Post the transaction and post all the different steps of the transaction, CHAPTERS Group will own 61.8%, with the remaining at 38.2%, essentially comprising the management teams of both Fintiba and Expatrio. Now the way we got there because we put kind of 2 similar-sized businesses together, we would assume that the average ownership goes down. And the way we got there is a big driver of that was -- that we used the debt financing to do a repurchase from, in particular, the Expatrio shareholders, and that increased the ownership of CHAPTERS Group. And we also acquired some shares from the Fintiba founders that we structured in the same identical way like we did last year, and we assume that and we expect that those shares will be converted into CHAPTERS shares over time. Now this really changes the scope of the group. And I'm really happy today that we're sitting here today, I mean, we should probably really be wearing CHAPTERS [indiscernible] we didn't have much time to pick our clothing today because we spent essentially 24 hours at the Notary office and in Fintiba offices, here we are. I'm really happy to announced Bastian as -- and our Supervisory Board decided to appoint Bastian to the Group Executive Board to the [indiscernible] of CHAPTERS Group AG, and that's really reflecting the importance of the Financial Technologies segment here. And we -- I think our Supervisory Board clearly sees that Bastian as a leader of that business should also have the end-to-end CHAPTERS level of responsibility to lead that business. Now through both open market purchases over time and then the initial transaction where we acquired our stake and paid with CHAPTERS shares, and now this transaction, Bastian is also a very substantial shareholder of CHAPTERS Group. So I think the incentives are really well aligned. And I'm really, really happy that Bastian decides to kind of move up to CHAPTERS Group and lead all our efforts in the financial technology segment. And that also means that my responsibility right now where I kind of split by commercial efforts between the software group and the Financial Technologies segment will shift more towards the software side because Bastian essentially is the end-to-end leader for everything, Financial Technologies at CHAPTERS Group, and I will lead the software group very much together with Marc, our COO, who most of you know, and we're going to focus very much on scaling that group and Bastian focusing on scaling Financial Technologies group and Marlene, as you know, focusing on very much everything else, and that continues to be the place. So 3 people in the Executive Board going forward with kind of my responsibilities on the software segment together with Marc and Bastian on Financial Technologies. And I've already spoken too much because really what's interesting is what Bastian has to say. I want to hand over to you to give a perspective on what you see as a market opportunity. What gets you excited about the acquisition that we announced today and how you imagine the future. And then I'm going to wrap up, and we take questions.

Perfect. Thanks a lot, and hello from my side. Thank you for the great walk through to the segment, to the history of Fintiba and the economics of the deal, which we signed today. And I'm really happy to be here and to give you a brief overview what are we doing in the segment. What are the drivers on the macro side? And where we want to improve our client offering in the future to create this organic growth, which Jan mentioned before. And I'm really honored to be appointed to the Executive Board of CHAPTERS. Since I founded Fintiba 10 years ago, a lot of things changed. But the real change happened since Fintiba and CHAPTERS started working together, Jan just showed the highlights of the last 3, 4 years. And it's really amazing what we achieved. We founded the bank, who would have imagined that 10 years ago, it's up and running now. We purchased one of our competitors end of last year, like Jan said. And yes, now we merged with another one. And we now have a really great position in the market to focus on innovation that will be developing further products for our customers. And yes, just improve our offering and develop the segment. I give you a short overview. We have like Fintiba, where you see the logo behind me. And we are pretty strong in the area of students. We started as a provider who offered blocked accounts, which is a product, which is essential if you want to get a visa to study in Germany, you need a proof of your financial resources. And the easiest way is the so-called blocked account. It's a pretty special banking product where you need a lot of specific process know-how. It's manageable, but it's complex in the beginning, our main competitor was Deutsche Bank. And they were never able to serve these customers in a proper way. And after we enter the market like 3 or 4 years later, they put the business because they were not able to provide processes in the quality, which the customers really like to use. And Expatrio and Coracle, they started a bit later than we and had more or less similar offerings. But on -- let's say, like a different regulatory approach, one was working with a payment provider. One was working or is working with the non-German bank. And we want to set standards in this market in terms of quality and security of the clients and the processes. And for doing so, you need a reliable infrastructure or you can call it also a banking backbone for the group, and this is one of the main advantages which we have now in the future and what will help us develop the group and the products. We have a bank in the segment where we can really work together where we have reliability in the infrastructure and the processes. And this is really something which brings the group to the next level or to another level. And on the other side, the bank is often more than one side of the balance sheet. You have the client assets on the one side and then you usually do something on the active side of the balance sheet. And there we -- Jan and I started talking about early what can we do there? And we found something which is called export financing, which is a niche product, a bit like the blocked account, where the German government gives you a guarantee for loans, would you give out to lenders abroad, which by German machinery and Germany is an export nation. And with FIB or with the group, we want to do finance beyond borders. Our customers at Fintiba, Expatrio and Coracle are coming to Germany from outside of Europe. And with FIB we help businesses in Germany, selling more products abroad, and we have the importers around the world to improve their own economic standing. So it's a great combination of knowledge for international payments, international KYC and all that stuff. And in total or in some, we are focusing on high-quality, mission-critical specialized products and the combination of market side, which we -- where we have 3 brands and a great and stable back end. It's really a big advantage, and we can use it to increase or improve the offering for our customers a lot. And what does the market where we're talking about the deal of today make so interesting? It's a market with the historical growth rate of 6% per year for the last 10 years, and this is due to several reasons. In general, in Germany, the promotion of international students is a political will. The German -- all of the last German governments supported international students coming to Germany because in Germany, we have something which is called like a shortage in skilled labor workers. And one of the best ways to support or provide the German economy, the talent they need are international students. And from this perspective, the government is investing a lot to improve it. They also help universities to implement more English thought programs to make it easier for international students. And beside that on a macro level around the world, a lot of big study destinations around the world are changing politically. You might have heard from countries where student visas get denied or even canceled. And Germany is a third biggest market for international students worldwide and the biggest non-English-speaking. But the total amount of international students in Germany compared to U.K. and U.S. still comparably or relatively small. So if you see a shift from these big markets to Germany, the impact is -- yes, what you see there. Additionally, the German government or the officials do a lot of research, and they just published a data or study which shows that the ROI on invested public funds, international students are really high in Germany. So they're really pushing that forward. They put new policies in to make it easier to work beside the studies or to start working in Germany after the graduation. And these are all factors, which makes Germany really attractive for international talents. And yes, we're on a trend which seems to be stable, and there are a lot of data showing that the trend in the next year's will stay like this. And yes, I think we're in the right market here and we love to extend that. What are we doing? I walked you through what I was talking, but we really want to offer amazing tailor-made products, which fits the needs of our clients to really help them to have like a financial inclusion if they are abroad and reduce the financial discrimination. For nonspeaking German customers, it's often pretty hard in Germany. There are banks which don't have an app where you can change the language and stuff like that. And this is really not fair, and we try to offer products there, which are free of discrimination. And so in the end, we want to offer a long-term financial home in Germany to make sure that the financial products really enabled our clients to be successful in Germany and enjoy their life without struggles or big questions regarding finance and banking. And yes, we're doing this by offering really high-quality products based on a secure and reliable German infrastructure or in the end, quality made in Germany. I would love to give you a short overview where the organic growth in the future might come from, and how the customer journey looks like. And customer journey is usually a journey of several years. If you think about studying or working in Germany start to prepare your learn language a little bit, you apply for university, you apply for visa, then you come over here, you start to study. And after that, you enter the job market. And for a master student, it's maybe in a short or the -- the shortest way is maybe 2 or 2.5 years. But if you do like a language cost before study preparation, Bachelor and the Master, this can also be like 7, 8 years. And one interesting fact is that nearly 50% of international students are still in Germany 10 years after they started studying in Germany which shows that the students who are coming over here really want to stay here and build up their own life. And this is interesting because there's no provider, which really offer them the products they need for their first day here. So they can go to a German provider which just give out like the standard product for everybody. But as an international, you often have specific needs, maybe even if you want to -- or if you plan to stay in Germany in the long term, you might have this idea in your -- in the back of your head. What will happen if I go back to my home country in maybe 20, 30, 40 years. Can I transfer my assets? Is my insurance still there -- even if I have gone sick and stuff like that. So it's not complicated, but there are specific or there are specific needs, which you can address. And at the moment you see our current core revenues, they are from the blocked account, mainly opening fees, monthly fees, the customer pay and we also offer health insurances which are pretty complicated, if you come to Germany. And there we get insurance commissions. And this is a start of the customer journey. Then you will get -- in the near future, we will create additional deposit income with the banking license as a first step, which will increase the customer lifetime value significantly. And in the future, we're just implementing a bank account or current checking account, how you name it, and this will generate revenues on the long term, hopefully, plus 10 years with the customer, which leads to a long-term customer duration. At the moment, we're losing the customer after 12 to 14 months because the blocked account is a product which you need for this specific timeframe and there is no need to have a blocked account after the period of time. So we generated a lot of customers. We are well known around the world. They trust us, they start banking with us. And after 13 months, we need to say goodbye and yes, help yourself. This is pretty sad. We never wanted to do that, but we were not able to do it with our former banking partner to set up a current account. Now we have the chance. We have implemented it. We're in the testing, and this will generate revenues in the future. And if you have like a current account as a long-term customer retention product, which customers are using day to day. So you have a touch point often more than once a day. You always have the chance to offer your customer more tailor-made products they need, and that can be something like a credit. This can be something like revenues from investment or insurance. So more or less, everything around finance. And this is a really exciting long-term vision and optionality for these businesses, especially if you think about that we now really can focus on product development and what our customer need after this deal. So I'm really excited. And yes, I'll hand over back to you, Jan.

Thank you. When you look back to 2020 and really to -- even to 2018 and 2019, that's the time when today's CHAPTERS Group came about. And I always refer to that as CHAPTERS ground 0. We were trying a lot of different things, and most of them worked. And we, over time, kind of developed a feeling for what we like best. And the deepest opportunities we saw are in our software group and in the Financial Technologies group. Now 1.5 years ago, when we decided to embark on CHAPTERS 1.0, which is really to build the group driven more by a strategic plan followed with policy deployment to make sure we are on track with that plan, it increasingly became clear that we are building 2 different rocket ships here. So we have the Software rocket ship, and we have the Financial Technologies rocket ship. And in the software space, the M&A opportunities are very fragmented and small, and it's a bit of a cookie-cutter mechanism of how we do M&A that has scaled really, really well. We've also been able to drive organic growth in the software group. And if you experience what we experienced in the last 24 hours, that wouldn't surprise you. You were just, as a little side anecdote, the way you buy a company in Germany is that you go to a Public Notary and that gentleman reads out the contract and kind of signs of the contract. So 8 people, huge pile of paper, spent 24 hours at a law firm's office, reading through the contract and documenting everything. If you ever in doubt whether the German public sector needs more digitization, let me tell you, my dark rings under my eyes are evidence for yes. So we are really excited about organic growth potential in the public sector. There's a lot to do and a lot of M&A opportunities, acquiring the different businesses in -- both in enterprise and in public sector in Europe. And then there's also the opportunity within financial technologies. And Bastian and I and the Board, we've been -- we've had quite good clarity on how does this look like when it's done. It's a bit harder to discuss with you as investors if the M&A opportunities are less than a handful. And the one thing you can start on your own is a regulated balance sheet business. It doesn't come that handy. So I'm excited today because today, we can kind of openly talk about and say, listen, this is what we were building towards and look, as we are embarking and scaling CHAPTERS 1.0, here 2 big rocket ships. We are really excited about both for different reasons. Both are growing organically, both have shown the ability for us to kind of deploy capital in accretive M&A. And I think that's important. In both, we win because CHAPTERS is really long term. We talked about that at length in the software group, but in particular here, and the slide Bastian just showed, this really makes sense if you take a 10- or a 20-year view. And you think about an ecosystem, you think about the ecosystem of students coming into Germany, all the little intersections with exporting like we touched upon and you can really build an ecosystem, an industry standard in an ecosystem, but you need time. Private equity wouldn't do it. It doesn't -- it makes sense if you have 20 years of time. And because we are aligned and you as shareholders understand what we want to do, I think we have the support and capacity to deploy that strategy. And here we are. I think it's going to be exciting to continue to scale CHAPTERS 1.0. We're going to announce our annual report within the next couple of days. We'll be more -- you'll have more information about the 3 segments. And we're also going to share more about the plan and kind of the more substantive financial outlook at our Investor Day in Hamburg, the day before our annual meeting, where we will give you a little bit of more specifics around, in particular, some of the earnings figures and like some of the mechanics of how this works through the P&L. We will do that when we see each other in July. But before that, we want to take the opportunity for you to ask questions, and we will answer whatever we can comment on. We are happy to comment on. And yes, thank you for your interest.

[Operator Instructions] Mr. [ Sinkovic ], you should be able to place your question now.

Jan and Bastian, great update. Congrats on the new job, Bastian and congrats to the team on getting the fintech structure over the line. Yes, first thing, could you briefly walk us through the CHAPTERS Group's current financial position specifically in terms of debt, shareholder loans extended to platforms and cash or liquidity at the holding level? I'm just trying to reconcile the current capital structure. And the second one, with the Financial Technologies segment being highly profitable and you will be significantly increasing customer lifetime value, should we think of this as a recurring cash engine for CHAPTERS' broader platform growth? So aside from repaying debt, obviously, will this bring changes to your capital allocation, perhaps shareholder returns at some point?

And so on the capital structure and financials, the one sad thing with M&A is sometimes you can't time these things the way you like them to be timed. So today, we are a couple of days away from the disclosure of our annual report, and we...

Yes, I have a patience.

No, no. No problem. Couple of weeks away from when we disclosed our preliminary numbers. So I know I have a very happy Executive Board colleague today, but I want my other Executive Board colleague, Marlene to also be happy and she won't be happy if I talk about anything that will be sent out next week. So I want to buy a little bit of patience. If I could draw my own painting here would be -- we would have done this deal next week. But Alex, I asked for a couple of days of patience on that live update. On the capital allocation front, no. There's absolutely no change to capital allocation. We hold a strong view that capital allocation needs to do 2 things. I think it needs to be inherently opportunistic. And at the same time, if you have a strategy that you can invest behind, that's something to look for. So for example, in our software group, just the opportunity cost of allocating capital at the multiples that we've done historically and the structural reasons why we can do that are just really good strategic reasons to think about how can we scale investment into that opportunity over time. But you need to be inherently opportunistic, right? And cost of capital goes up and down and you need to be able to flex your deployment speed based on your cost of capital, and that will not change in the future. I think the way we look at the Financial Technologies cash flow is that for the time being, the focus will be on paying down financial liabilities. We expect that to happen in a reasonably quick timeframe based on the synergy that we expect from that business. And we would then review whether there is an additional reinvestment opportunity within that segment or whether the cash is channeled up to CHAPTERS Group and then we deploy it here. With that being said, Fintiba is responsible for a couple of VMS acquisitions that we've done because over the years, we've received substantial dividends out of Fintiba. And we use that cash really to grow in the VMS group. So I would not be surprised if that's one of the things how this could play out over time. But you can always expect us to be incredibly opportunistic and as shareholder returns, for example, by way of a buyback are a better opportunity than to scale by way of M&A, we will do that. And if it's better to scale M&A and dilute, we will do that, but it's all driven by a mindset of improving value per share, and that's our North Star.

Maybe a follow-up. You have positioned CHAPTERS as a long-term value creator, the contrast, exit-driven models. Is that meaning that a potential IPO or spin out would not be on the table for the new business.

Listen, spending 24 hours with law firms and tax advisers and a notary on structuring, I think our appetite to do a maneuver of that this week is limited. But also, I think 2 drivers will drive this, right? So the first one is strategy, and the other one is corporate finance. And if there is a really good strategic reason and/or a really good corporate finance reason, we will always review options like that. Today, apart from the sheer kind of economic input, Fintiba has been a fantastic member of the group. I touched a bit about policy deployment as a methodology that we use internally, the business that got us there and kind of the pioneer of deploying policy deployment within CHAPTERS was Fintiba. So if Fintiba hadn't been the pioneer than it was that it is today, some of the success we see in the software group would be less likely. And that's great. The least thing I want is to lose that. But also, I mean, expect us to be rational, expect us to look at the opportunities at the time, but also expect us to, in particular, Bastian, on shopping the wood that's on the table here because in terms of integration and platform management, all of that, that's going to keep everyone pretty busy for the foreseeable future. And I'm not sure it's wisest idea to kind of start a big corporate restructuring process in the very immediate future. But yes, always expect us to look at this rationally from a shareholder value perspective.

We move on to the next participant, [ Mr. Nath ], you should be able to speak now and please your question.

I'd also like to congratulate Bastian on the Board appointment and Jan and CHAPTERS on another great meaningful acquisition. In simple terms, it would be very helpful if you can help us assess the deal in terms of what chapters paid. I know you went over some of that. But in return, what shareholders will receive sort of to get a sense of return on capital on day one. And then, of course, maybe if you could give some insight into what you expect it to be over the longer term?

Yes. So again, I need to disappoint you a little bit until the annual report, where we have a bit more of the statutory disclosure that we will have to do. So you don't have to wait for long, but part of those answers will be answered when we come out with the release. I'll give you a high-level update here. So when you look at the valuation for the entire group and you look at today's profitability or the pro forma 2024 profitability of the merged group, you would see a multiple on EBITDA that is higher than what you expect -- know from us in the past. So you would see a multiple that is in the teens instead of the kind of 6 to 7x that we used to pay. When you think through different scenarios around synergies, and I need to be a little bit vague here, given where we are in the process, given some of the confidentiality that we agree with just some of the analysis that will only happen now, but there are bands around how to think about this. And I think also the expectation is that within a year or 2, the effective multiple will be at or below where we historically acquired companies at. Now when you look at 2 important other drivers here, what we got in return is a business that has a volume growth, that is quite a bit higher than the average volume growth we see in the software group. And we shared that in the past that kind of volume group in the software -- volume growth in the software group is more in the kind of low to mid-single digits and this is clearly higher here in this segment. So I think you could argue -- and on top of that comes the cross-selling opportunities and all the rest of it. So I think you could make a case that there's an attractiveness to that underlying business quality. And I think a second important aspect, the reason -- or the way we got there happened in a very equity-efficient way. So the way we structured the transaction, in particular, with the amount of debt and the way we structure the debt means that this took pretty few resources away from our other investing activities and still got us to that deal, which I think is highly attractive. But we will share a little bit more about that when we come up with the annual report.

That's very helpful context and a good overview, and I'll obviously wait for the annual report. Just one follow-up. On the initial -- the sort of high-level multiples you mentioned, that is -- would it be right to say that's for 100% of the business?

Yes, you look kind of at the deal EV and you look at the pro forma '24 or even '25, there's not a huge difference, EBITDA profitability, you would get to the number that I outlined. But then you break down kind of the near-term effects and you also break down the equity efficiency, and I think you get to a pretty attractive return on the equity that we deploy.

And by now, we have not received any further questions by now, neither in the chat box or by participants raising their hand. Wait a few more moments if that's the case. Well, maybe a follow-up.

Sorry, I should have asked this before, but I just -- it came to my mind, when you mentioned, Jan, the sort of the conversion of the return on capital to return on equity, is that basically you're saying that this financing has been structured mainly through debt. And because it will be repaid over time, the return on equity will be significantly high.

So I mean, again, I need to be a little bit high level here. But CHAPTERS used to own 55% of Fintiba. It's fair to assume that the merger with Expatrio, similar scope, similar size, similar valuation. So if you just merge the businesses and did nothing else, our ownership in the combined group would be somewhere, I don't know, between 25% and 30%. Now what happened is that we did that first, and then took external financing in, vendor loan financing in and made a repurchase of shares from both Fintiba and Expatrio shareholders -- in particular, Expatrio shareholders. And the ownership through that repurchase of CHAPTERS Group moved up to 61.8%. So the increase in debt, which Fintiba right now has very little was used essentially to a buyback and the structure and that gets you to the target picture of us owning approximately 62%, but the business also having a level of leverage that it didn't have before. And we -- to get there, we did have to put in equity, but it was a small percentage relative to the enterprise value of the deal.

That is the amount that is through the share issuance or that Fintiba...

Yes, the share issue is that we also used some cash. I think about that as kind of the equity component of the deal, and that's comparatively small versus the debt component.

And [ Mr. Sinkovic ] which was raising his hand for a follow-up maybe, so he can just try to get this again, if he wants to.

Yes. It was something in the direction of the annual report. So I think it's tiresome for Jan. But perhaps just to get your mindset, how do you think this will affect the valuation logic? Perhaps maybe more specific, should investors think for the financial services more in banking or more in software multiples here?

I mean that's your job and not mine. But -- so the banking part is going to be -- so the core like P&L of the bank, given that that's just getting ramped up and is going to play a relatively small part of the P&L structure for the foreseeable future. So when you say banking and you mean bank balance sheet bank-type P&L, that's not going to be relevant for the reasonable future. When you say income that is not in recurring revenue stream like the software business, I think the Fintiba business has more kind of transaction, interest-related income. Historically, when -- in particular, in some of the equity issuances that we've done, investors described a similar valuation to both businesses because the financial technology business, Fintiba is -- this is a great business. It just has a bit different structural characteristics than software, but it's a beautifully growing, high cash flow generative business. But time will tell. And it's up to us to increase the transparency, which I think historically, given all the changes at CHAPTERS has been an issue for readers of financial accounts. You need to actually like take a lot of time to kind of dissect like what's going on here and what's a good run rate and all of that. And this is getting increasingly easy to digest with the group getting simpler. But time will tell, right? And I think our job is to focus on the commercial execution of the business and then report on the results in a way that you can form a view. And we don't want to manage that too much.

We got another follow-up from [ Mr. Nath ], you should be able to speak.

This might be off topic. And Jan, if it is, then no need to cover it. But I saw the acquisition of also this post on Finfox and which was in digital wealth management, how do we assess that in terms of these 3 buckets that you say public sector, enterprise and financial technology?

Yes. It's a great question. So the Financial Technologies segment is the payments and fintech business around Fintiba, Expatrio or Coracle. The Finfox acquisition, a transaction we really like, something we would currently put in the enterprise segment. And it's a business that is in Marc's reporting line. It's a fantastic business that we acquired in kind of a unique off-market circumstances. We really like the business. Now I think what you're thinking also occurred to us because there are kind of objective parallels between that service offering and what Fintiba wants to build. Our bank is using a core banking system. You can also buy core banking systems and possibly run them better. So all these things are -- we will handle them the way we will always -- have always handled things at CHAPTERS, which is to be opportunistic and then see if we can use some momentum and build a sound strategy out of it. But for the time being, think about the Finfox business a beautiful addition to the VMS group, run by our VMS leader, but a cool cousin in the group when it comes to like deploying wealth management solutions at some point for Fintiba, I think it's great to have that. It's going to take some time until that becomes a fully fledged thought-out strategy, but you never know. The two deals happened completely independent of each other, but we learned during the deal that may have looked differently, but it was completely different decentralized decision-making. Yes, 2 cousins.

Well, another follow-up, Mr. [ Sinkovic ], you should be able.

Sorry, just one. What to think about your product expansion. Will you rather choose to create your own solutions? Or will you integrate external solutions either via acquisition or even partnerships maybe?

You mean regarding the Fintiba, Coracle and Expatrio business, right?

Yes.

We'll decide this from case to case. And there's also a chance that it changes over time. We have really good experiences with -- starting with a partner of our product. We also did it with banking. So in the beginning, we had a banking partner, and we developed it to a critical scale where it was worse to set up your own infrastructure. We have a critical size in insurance that we really have high cross-sell ratios. But for the time being, I would say we're not as big or not big enough to really fill an infrastructure of an own insurance that would be another game. But I would not say that we would never do it in the future. But the circumstances needs to be the right one. So I would -- in my opinion, we do it like in an iterative approach. We launch like small tests, see if the customers really want or need this product. And then if we see the demand develop it from there step by step. And usually, it's a faster, much cheaper and lower risk way to do it with a partner first like for SIM cards, in the beginning, you can just send out SIM cards branded from another person. The next step, you can brand your own SIM card. Well -- and then you can do it like Trade Republic. They now have like [ Trade SIM ] or I don't know how they call it, but they have a SIM card. Maybe there is Expatrio or Fintiba SIM in the future. I don't think that we will do like infrastructure for an own mobile network. No, we do it, like Jan said, in an opportunistic way. And if we tried with a partner and we don't see the demand, why should we put resources and capital in products, our customers don't want to have that would not be really efficient. So the answer is a bit of both, if this helps you.

Well, thank you. And no further questions have been received in the meantime, I'll wait a few more moments. Well, no questions anymore. And we, therefore, come to the end of today's roundtable. Thank you for your participation, your interest and your questions. And should any further questions at a later date arise, please do not hesitate to contact the Investor Relations of CHAPTERS Group. I would also like to take the opportunity to thank you, Jan and Bastian, for the presentation and for answering the questions. I wish you all a pleasant day and would like to hand over to you again, Jan or Bastian, for some final remarks.

Just want to say thank you. Thank you for your interest. We started 6 years ago, I don't think anyone would have -- it would have been a very lowly investor call, and I think we're growing and explaining what we do. So thank you very much for your interest, and talk to you very soon.

Thanks a lot.