doValue S.p.A. (DOV) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the doValue 9 Months 2023 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Stefano Songini, Group Head of Investor Relations, Communications and Sustainability of doValue. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen, and welcome to the doValue's 9-Months 2023 Results Conference Call. I'm Stefano Songini, Group Head of Investor Relations Communications and Sustainability. And I'm joined here in Rome by our CEO, Manuela Franchi; and our Group CFO, Davide Soffietti. Together, we will cover the main group of market development since the beginning of the year as well as the financial performance for the first 9 months. At the end of the presentation, as usual, we will be happy to take any questions that you may have. With that, I will now hand the call over to Manuela.

Thank you, Stefano. It's a pleasure for me to present our 9 months 2023 results, which reflected solid operational performance with a plus 7.3% year-on-year increase in collection, in the context of a seasonally less significant third quarter. The year-on-year comparison is also skewed in light of the factors that in the 9 months '22, we had the large indemnity on the Mexico portfolio, if you might member. Moving to the presentation on Page 3, we show some of our key achievements in the first 9 months of the year. In general, I think it's important to note that the formation on new NPLs in 2023, has been much lower than we and the industry expected. And this is obviously had an effect on our overall results, which we have to a slight extent offset by focusing on secondary transactions. However, we expect the new NPL formation to materialize in the coming 12 to 18 months. As a result of the macro-political challenges, high inflation and increase in interest rates and just the observation of the performance of the borrowers in our growth portfolio. As you know, the third quarter is seasonally the weakest in the year as it includes the month of August which typically in Southern Europe, business is lower and cost activity is at a minimum. This is also evidenced by the data we will provide you with comparative information on 9 months 2021. The year-on-year comparison, as we will see, is also affected by the indemnity we received in the third quarter of '22, which makes the comparison with the 9 months of 2023 on balance. As you know, indemnities as part of our core business, but historically, we received the most of them in the fourth quarter and 2023 should be no exception. As you can see, we have reported a robust increase in our collection on a like-for-like basis with a growth of 7.3% over 9 months '22, supported by strong momentum in Greece, but also in relation to Spain, net of Sareb off-boarding. In Greece, in particular, we are seeing very positive macroevolution, further supported by the upgrade investment grade of the sovereign rating by S&P in October 23. Also in Spain, the rightsizing of the operation of [ Sareb ex ] is well underway and the fruits of new commercial strategy based on apparently new client, new portfolio, new services are becoming evident. We are also streamlining our operation with a strong focus on cost discipline, a similar execution with complex restructuring plant in Spain and the positive effects of the investment base in the past on our technological platform as part of the due transformation program, which has made our operations more efficient. This has enabled us to achieve a 34% reduction in OpEx and 11% reduction in HR cost, which is above our expectations. Finally, in terms of net leverage, we see the effect of the seasonality I mentioned earlier, which have led to a net debt LTM EBITDA of 2.9x as of September 2023. This includes certain movements in working capital that we expect will be reversed in the coming 2 orders, the payment of a very general dividend of EUR 48 million, seasonal effects of our business, higher taxes and interest payments in the period. Our net leverage remains one of the lowest in the credit servicing industry and within the stated maximum threshold of 3x. We expect the leverage ratio to normalize in the fourth quarter at the level around 2.7x. On Slide 4, we represent our review our business and the opportunities looking ahead. From the basic NPL servicing market, doValue gradually expanded its footprint, also thanks to the relevant expertise in obvious in fact of the value chain, such as [indiscernible] that we were able to secure to the acquisition in Spain and Greece. We have therefore used this experience to provide a wider range of core services in all markets we operate in. Moving further up the chain and diversifying into earlier years down the value chain by providing the wide area of ancillary services, which as you will see, are become increasingly relevant in our revenue base and which provide attractive margins. Looking at, we continue to see an opportunity to move further into the performing space, which you get to see on the left-hand side of the chart provides interesting dynamics. While banks are today witnessing the historically lowest level of NPEs, the stage 2 loan dynamics are quite different with double-digit rates in Italy and Greece and around 7% in Spain. These loans can either return in bonus or gradually fall into the nonperforming space, provided us with an interesting opportunity. Moving now to more general macroeconomic trends. We are witnessing in our major countries. On Slide 5, we can see how the reduction in NPEs on the bank's balance sheet is not so much driven by the fact that banks are no longer generating NPEs, but rather that they've been able to compress their NPEs, thanks to significant reports to an efficient and functional ecosystem to dispose and manage NPLs. In fact, as shown by costing data on the disposal and bank balance sheet, it's clear that given the challenging macro context of the last 2 years and Italian Spanish bank and Greek banks would now own more NPEs than at the beginning of 2021. And this is the context of the sluggish growth of new loans. It's worth noting that in addition to the NPEs add value system, there is a significant amount of NPEs as by state-sponsored entities that could or will come to market like [indiscernible] guaranteed loans by [indiscernible] Italy. PQH loans in Greece, which are now materializing in the [indiscernible] transaction. Looking at the PMI index developed by S&P Global, where cost above 50 indicate an economic expansion and costs below 50, an economic contraction. Italy and [indiscernible] shift from positive trajectory in 2021 to negative territory in '23. Recent data for Italy on GDP in the third quarter of '23 marked stationary trend versus the previous quarter. In Greece and Spain, the PMI index as proven [indiscernible] remains above 50. In this context, we believe that the banking system will be tackling any pickup guarantee more proactively, not just the risk, but also to improve ROE profitability and reducing the lack of between permission and disposals. If we look at the historical trend of the stock of the defaulted loans in Italy on Slide 6, several statistics outlined our tenure in credit quality, historical derisking operated bank to bank and general resilience of the global economy contributed to a decrease in the stock of defaulted loans, although it's generally expected that they will increase again with [indiscernible] report ratios default ratio significantly lower compared to previous year estimates. It's ever worth noting that recent data seems to point to a rebound in effort rates, both for house loans as well as nonfinancial corporation over the coming 2, 3 years. In this macro scenario in the first 9 months of '23, doValue successfully continues to develop its business, increasing its share of transactions at approximately EUR 3.5 billion with a market share of around 20%. On Slide 8, I would like to share how the new transformation program is effectively shaving our cost base, in particular, in terms of IT cost and it accounts. As you can see, in all of our countries, we have been able to redesign our processes with the support of digitalization. In particular in back-office activities, enabling us to achieve approximately 300 FT efficiency and substantially reducing our technology cost by around 15%. This will set the base to react the dual effect at the group level from 2024. On Page 9, we have outlined the impact of our technology in full operation efficiency plan that will maximize value from all our cooperations. This can be divided in 3 macro areas. First, have ability to improve the quality of the portfolio and accelerate onboarding, including artificial intelligence, advanced analytics and natural language understanding. Second, digital platform and omnichannel for our customers; and third, automation and digitalization of manual and administrative activities. The implementation of these announced capabilities will deliver substantial operational benefits. 10% of transactions can be managed by virtual asset managers, 30% reduction in time spent by asset managers on low value-added activities, 5% improvement in recovery rates and 10% reduction in servicing costs. Moving now to Page 10. We have a pipeline of potential new business of approximately EUR 14 million to EUR 15 million over the next 18 months, which contains some very large government-sponsored transactions, such as the 5 billion project around [indiscernible] that is now been officially launched and the [indiscernible] as well as 2 transactions additional from Eurobank and NBG in Greece now officially announced. It's important to note that [indiscernible] developing a more resilient stream of revenues by refocusing its commercial efforts in securing a larger number of mandates with a low average size rather than relying on few large mandates from limited number of clients. We remain highly committed to our ESG strategy, which as you can see from Page 11 has been declined in concrete quantitative targets for 2023 as part of group sustainability plan for which we are fully on track. Our efforts have recently been rewarded by faster improvement just a few days ago in the rating that's signed by sustained analytics with a low risk and I figured rating improved from 19.1% and the original 18.8%. This is in addition to the recognition by a number of primary ESG rating providers, which have improved the rating assigned to the group. Moody's Analytics upgraded its core from limited robust in July 23, and MSCI ESG rating upgraded its rating from double A to triple A in March '23. With that, I will now hand over to Davide for a further look to our financials.

Thank you, Manuela, and good morning to all of you. Moving to Page 13, we have here a summary of the key financials for the third quarter and the first 9 months of the year. In order to better highlight the seasonality effect on the 9 months and third quarter 2022 results, we have included comparative purposes, also third quarter 2021 and 9 months 2021 financials, which clearly indicates this is no effect on our quarterly results. As already mentioned by Manuela, the quarter is in line with our expectation and reflects the weaker-than-expected market of new NPLs, partially offset by solid collection performance, in particular, in Greece and Spain. As usual, we are showing variations both including and excluding Sareb in order to highlight the performance of the business on an organic basis. Let's move to Page 14 to have a better look at the gross book value [indiscernible]. Our GBV has declined marginally compared to the end of 2022, mainly due to lower-than-expected new NPL volumes in the market and to a strong performance for collection of GBV and increasing disposal mainly linked to the build portfolio and sale of secondary in Greece. The GBV has; however, been supported by forward flows from our partner banks, which have grown significantly versus the same quarter in 2022, up 50%, reaching EUR 2.6 billion. Our business development efforts are visible in the new mandates secured for 6.1 billion GBV despite lacking the [indiscernible] the past. Please note that in 9 months of 2023, the company has won over 12 new mandates, albeit of small size. In general, given the group importance of a secondary transaction, we expect the collection profile to become more lumpy and more concentrated in the fourth quarter of the area. The collection rate stands at 12.5% as of the end of September, improving by 0.5 percentage points from the 4%, recorded 2022. Moving to Slide 15. Gross revenues in the first 9 months of 2023 decline is by 21.2% year-on-year to EUR 335 million and by 31% in the third quarter, in large part to the off-boarding of the portfolio. The comparison versus last year, as we mentioned, is affected by indemnity on the Mexico portfolio recorded in the third quarter of 2022, whereas typically, most disposal indemnities are recorded in the fourth quarter. Excluding Sareb, the comparison between 9 months 2023 and 9 months 2022 shows a decrease of 11.7%. In Italy, the gross revenues declined marginally due to lower collection, down 4% year-on-year and in line with the GBV trend. With NPL decline being partially offset by growth in GBV, up more than 100% over the previous year and by 5% increase in ancillary revenues. Performance in Greece was strong with collections up 25% year-on-year and despite the restocking effect of the Mexico indemnity in 9 months 2022. Gross revenues in Spain declined over the previous year due to lower collection, in light of [indiscernible]. On next slide, we highlighted the balanced mix of GBV and gross revenues across our different clients and different product lines. As you can see, the higher share of gross revenues versus the corresponding share of GBV from commercial back reflect higher than average GBV [indiscernible] quarter. It is important to note that our new revenue streams of ancillary revenues, the convergent are also gaining material traction and with an increase of 24% year-on-year, growing their contribution to gross revenue to 13% from 8% in 9 months 2022. Moving to Slide 16. We show the result of our cost discipline measures. In sourcing strategy and restructuring process in Spain, we continue to optimize and reduce our outsourcing activity, both leverage on a different portfolio mix [indiscernible] with the lower dependence of type of GBV management, as well as insourcing some activities. Outsourcing fees declined both, [indiscernible] and as a percentage of gross revenue, positively contributing to sustaining our EBITDA margin. HR costs, our single largest cost item were reduced by 10.6% year-on-year to EUR 141.8 million, mainly driven by the reduction in EBITDA related to the cost restructuring program that we provided run rate saving of EUR 6.4 million in 2024 and was EUR 19.5 million since [indiscernible] third quarter. In Italy, HR costs were also reduced, partially thanks to the one-off release of the LTI cash plan allocation for the previous year. HR costs, increased marginally in the Atlantic region due to the onboarding of new portfolios, SKY and Frontier too. Other operating costs declined by 34% over the previous year with decent contribution from the 3 regions. A significant achievement was delivered in Iberia where other operating costs were up year-on-year. Thanks to the total formation program, which was accelerated by the nonrenewal of the [indiscernible]. On Slide 18, we see how the combination of lower gross revenue, coupled with the significant cost efficiency put in place [indiscernible] to achieve an EBITDA of EUR 150 million, decreasing 24% year-on-year and by 15% excluding Sareb, with a margin of 34.4%, which is always slightly below the previous year despite the decrease in revenues for [indiscernible] Sareb. As mentioned earlier, in the Q2 2022, we recorded a significant indemnity from the Mexico portfolio, which skews the year-on-year comparison. As a reference, you can see that in 9 months 2021 EBITDA was the same as the one reported in 9 months 2023, reflecting the typical seasonality of our business. In Italy, EBITDA declined as a result of lower revenues. Sorry for the interruption. In Italy, EBITDA declined as a result of lower revenues as well as EUR 7.9 million of group costs, which are consistent with the past practices. The Atlantic region contributed strongly to the group EBITDA and now accounts for more than 80% of the group's results, both including in respect of the [indiscernible] indemnity. In Iberia, the positive impact of the higher collection rate and the material cost efficiency measures partially compensate the lower margin due to a delay of converting new investors' portfolio. Reduce inflows of NPL and lowering from [indiscernible] due to the decline in real estate prices. Please note that this year reported EBITDA and EBITDA [indiscernible]. On next page, we show the performance across our region. Adding to what we have already mentioned, commenting on the financials, it is worth noting that 0.5 percentage points improvement in the collection rate, which reached 4.5%, supported by the [indiscernible] Spain. Commenting on the net income section in next slide show, the performance is similar to the one service for EBITDA, a seasonally weak third quarter which compared to the very strong Q3 2022, also the result [indiscernible] makes the comparison [indiscernible]. In the 9 months of 2023, the reported [indiscernible] also impacted by an increase in net provision, mainly relative to the [indiscernible]. Moving to Slide 20. We generated a positive cash flow from operating -- operations in 9 months 2023 of EUR 38 million, which compares to positive result of EUR 63.9 million in 9 months 2022, which net of mix indemnity is quite aligned. We are quite satisfied with the efforts we are put in place for the managing working capital across all of our regions, which has enabled us to materially reduce the working capital [indiscernible] versus last year. The dividend payment of EUR 48 million [indiscernible] in the tax payment schedule in Greece as well as interest paid the bond in Q3 2023 and due to the leakage from the very risk to manage shareholders, has led to a negative free cash flow of EUR 55.6 million in the 9 months of 2023 compared to a negative free cash flow of EUR 21 million in 9 months 2022. The expected EBITDA in the last quarter of 2023 will generate an increase in net working capital, which is expected to be absorbed in the first quarter of 2024. We expect our cash flow from operations to exceed EUR 50 million in the full year 2023. As shown on Slide 21, these movements have led to an increase of our leverage from 2.4x at the end of June 2023 to 2.9x, still within our financial policy range of 2 to 3x and one of the lowest in the sector. Please note that this leverage is related to seasonality weak [indiscernible] EBITDA, and we expect this value to normalize at the year-end to around 2.7x. Our financial structure remains solid with more than 200 million [indiscernible] between $96 million of cash and EUR 120 million of trade lines as of end of September. In terms of liability management, our next bond maturity is in 2025. Our bonds are trading better on the secondary market versus our peers. The demonstration of attractiveness of our capital-light servicing model also for the investors. Please post note that we have decreased our gross debt by repurchasing and selling approximately EUR 5 million of nominal bonds in the open market, allowing us to reduce the financial charge and booking a small profit on the difference between average purchase price and nominal value. I will now leave the floor to Manuela for her closing remarks.

[indiscernible] is on GAAP our presentation on Page 22. The results of the first 9 months of '23, owing to a positive trajectory despite the challenging macro context and the lower-than-expected NPL volumes. Our collection performance was solid in Greece and Spain [indiscernible]. And in Italy, we are seeing a growing business from UTP ancillary services. The performance in Greece is supported by the strong market momentum including the investment grade recently expanded to the sovereign rating by S&P which outlines the positive outlook on our business there. Our cost-efficiency initiatives are delivering above our expectations, enabling us to deliver our services in a more efficient way, thereby protecting our margins. We expect that macro headwinds and the proactive approach of banks will drive new business opportunity in the next 18 to 12 months, which we believe will be able to win a little structure in all countries. Lastly, I would like to share with you our guidance of '23 full year results, for which we expect gross revenue in the range of EUR 495 million. EBITDA [indiscernible] in the range of EUR 175 -- 185 million. And the net financial position of around 2.75. Regarding the dividend for '23, the Board of Directors is currently discussing this topic, also in the context of the board, we are carrying out on the new business plan '24/'26 of the group, which we expect to present in early 2024 and in light of our financial policy. We leave now space for your questions.

[Operator Instructions] The first question is from Azzurra Guelfi with Citi.

I have a couple of questions. One is on the implied fourth quarter guidance that is in your 2023 updated outlook. If I try to calculate what the implied fourth quarter, it seems there's going to be a strong rebound, both in revenue and EBITDA. And I just wanted to check if you can give us some color on what makes you so constructive on the fourth quarter. Is it a contract that you've signed, a new mandate, or something along the value chain. The second one is on the cost efficiency. You have clearly made great progress on that front. Can you give us some color on what are additional action that you could look to exploit on this? And if you need new investment also for if you want, expanding across the value chain of the NPLs and stage 2 and performing loans as you were showing in Slide 4, which brings me to my last question, which I'm not sure if you can answer, but if you can give us some color on what are the initiatives that you see as key road map for the plan. Shall we use Slide 4 as a reference of what could be the new value in the future plan?

Thank you, Azzurra. Let's go through the -- your question one by one. On first, targets, we have onboarded the transaction just last quarter that we had anticipated that the Sky transaction in front Tier 2, which will obviously learn that revenues in the last quarter, and they were not included in the biggest book that were expected. On top of it, we will onboard a significant secondary sale transaction in Greece that are already underway for around EUR 1.3 billion. So this type of sales process requirements. But we are in the phase of getting the final offers and finalizing the results. So the confident on the year-end are on contracts and secondary transaction, which we are working already in the execution phase. On the cost savings side, the efficiencies are both on the HR and IT side. On one of the slides, we have shown that we have been able to exit already receivable and reduced IT cost by 15%. In these numbers, we are not reflecting the run rate of sample that the [indiscernible] was mentioned for around -- more than EUR 6 million, which will make a saving of run rate 2021 versus 2023 only in the Spanish market of EUR 19 million. On top of that, we will continue with more exit. But this is already what is achieved. The same happens for the exit we recorded in the Italian and in the Greece market and the results of the efficiency metrics and the dual formation program in the local countries. In terms of investment for announcing the value chain, one was related to the management of earlier years [indiscernible]. As you can see, and we have said in the past, we have already exported the tool to manage this type of products from Greece to the Italian market and to the Spanish market. So where we see investment in the future are not around of innovation, artificial intelligence, predictive analytics and less so in the part of the transformation side where most of the plan has been achieved. We have highlighted in the past that the transformation program that we have announced in beginning of 2022, the 2 transformation was almost 90% completed for the end of this year. In terms of initiative a roadmap for the plan in terms of expansion of the product, we are focusing very much on the Stage 2 products of the earlier product offer in Spain, which has already materialized in the contracts with [indiscernible]. You have seen our announcement in the third Q related to the flows we are receiving already on this contract, which we think will expand and also the smaller figure side, which we plan not to manage with the traditional models of cost centers and the like, but the digitalized platforms where the opportunity is to recover automatically and also the services for banks.

The next question is from Lars Dueser with Deutsche Bank.

Thanks for taking my questions and I have a few of them today. Firstly, when I look into the quarter itself, it looks like this indemnity fee is really one of the main drivers, if not the main driver. I see that Q3 collections in Greece were up nicely, yet the gross revenue number down, call it, 35% or so. And obviously, it's a bit difficult to estimate this. But like to me, it looks like the indemnity fee could have been around EUR 20 million to EUR 30 million in Q3 '22, so I just wanted to double-check if that is a fair ballpark number.

If you -- look, your question is around 2022 as a comparison to now, we have mentioned in the past that our average indemnity for the year is around EUR 20 million. While in 2022, this impact was double that amount. So if you take out the net effect would be EUR 20 million on top of which we obviously this year will not have while we run on the average amount this year. This is on the like on like basis.

Right. And this was mainly taken in Q3 last year? Or was that spread across the year?

No, no, it was absolutely because the normal indemnity transferred through the year, but domestic indemnity was concentrated in the third Q. This is the difference between the third Q '22 versus '21 and versus '23. And the 9 months '21 versus '23 are very much consistent. The peak was in the 9 months, '21 for this specific region, while usually, the most of the transaction happened in the last Q, and this was in '21, and we see in '23 as well.

And then moving on to the next question. When I look into Italy, collections there seem to have worsened a bit, right? Year-over-year, I see them down mid-teens, and that is a bit higher than the GBV decline, which was around 5%. So what was driving that. Why was -- why were collections lower than the GBV decline would indicate? And also why did that then leads to such a gross revenue performance? What is the explanatory factor behind this?

The decline was 4% last -- maybe it was unclear in the numbers. The decline versus GB is driven by the macro environment. And that's the point we were making before. We see borrowers less able to pay and therefore, they tend to renegotiate on the legal side rather than achieve extra-judicial segment. This is also a result of lower reality. And that impacted the auction settlement of some of the judicial procedures. This is blowing the collection in 2023 and bringing them forward.

So is it fair to assume that you also expect in Q4 a bit of a divergence there that collections will be probably down more than the GBV decline itself? Is that fair?

It will be consistent with the trend seen so far, but it's factored into our assumption for the year-end.

And then talking about maybe the dividend. Obviously, on an LTM basis, if I look into your levered free cash flow generation that hasn't been that high than in prior year even though you could argue it's distorted by all sorts of line items, working capital related, other assets, other liability changes and so on. But you have paid out regardless of EUR 55 million dividend over the last 12 months, right, which seems on the LTM numbers, at least fully uncovered. So will you update the market on this soon?

Sorry, Lars, could you repeat the last part of the question, sorry.

So yes, sure. The question really is when will you update the market on your dividend policy?

Could you repeat the last part of the question, sorry.

So yes, sure. The question really is when will you update the market on your dividend policy?

We expect that work to be completed by the end of this year. And within that, obviously, one of the main discussions we're having with the shareholders relates also to the dividend and obviously, within the new business plan potentially the dividend policy there. So we expect to update markets in early 2024.

And then very quickly, last question. M&A, you made it a priority this year so far, no deal got announced. So is this still something we have to expect by year-end? Clearly, the press is full of M&A headlines as is usual, I guess, with doValue. And then also any update on the refinancing of the '25 bonds, where you still have obviously time to deal with that.

Yes. On M&A, we are always consistently careful about our financial policy. And therefore, we will go after and conclude if we are able to preserve our financial policy and accretive transaction. So this is the priority. So headline rumors is just because the market is very much active in terms of transaction, it doesn't mean that we are involved. We see opportunities for consolidation in our core markets, [indiscernible] in Spain, there are a number of market players in both of these countries. We are looking to select one, which will enable us to expand the performability to technological platform, allowing to serve our customers more efficiently and enter into new segments of the market, including targets outside our core regions. But this is in the limit we just have indicated. For the refinancing that we have shown in the past regarding the approach to financial policy, we will be always attempted to be in the market early enough to make sure everything is consistent with our overall conservative approach to leverage.

The next question is from Eleni Ismailou with Axia Ventures.

Congratulations for a good set of results. Just a follow-up on -- looking ahead basically, how is the company planning to allocate cash between M&A and dividends in order to create shareholder value? And another question on free cash flow. What -- how should we think of the sustainable free cash flow you anticipate as a normalized run rate for full year '24?

Eleni, thank you very much for your questions. I'll take the first one. So basically, as I was mentioning before, we're working on the new business plan, which obviously will be something that's quite work more aligned to the current market conditions, which are clearly very different from the ones that underpinned the 2022 business plan that was presented almost 2 years ago. Within that, really the financial capital allocation is one of the key factors that the Board is putting their heads on. As Manuela just mentioned, clearly, we are very keen on expanding our business through selected M&A on various streams. So all of this will need to be combined together. As you know we are also perming a share buyback as we speak. So all of this really forms part of the overall capital allocation discussion that we will present in a very clear fashion in the business plan in early 2024.

I guess the second question on cash flow. As you see in 2023, we had some extraordinary exit in terms of cash flow that future will be not anymore there. So we could expect on cash flow, starting from the EBITDA, we will have an impact on the cash flow because of the CapEx. Then we need to also take into account the leasing contracts that are not in our EBITDA. So it's around EUR 15 million to 18 million per year that will impact our cash flow generation and then any other redundancy cost because also this year, we have the huge market [indiscernible] because we were able to reduce a lot the number of [indiscernible] because in the plan, we still have to reduce people [indiscernible], we still have redundancy costs next year. All the other items that were affected negatively 2023 will not be any more in our cash flow. It should be around 50% cash conversion from EBITDA.

And again, congratulations for the set of results.

The next question is from Simonetta Chiriotti with Mediobanca.

A couple of questions from my side. The first is on Greece. If I am not mistaken the...

Simonetta, sorry, we can hear you very poorly.

Is it better now?

A little bit better, thank you.

So the first question is on Greece. There are more then -- there are ancillary fees that are much higher than in the past in the third quarter. So I was wondering if it is a structural change or they are related to a specific project? And the second question is on the GBV evolution in 2024. Looking at Slide 13, it is clear that you have onboarded the old mandates that you had secured in the past month. And so from now on, we will have to see new mandates. So if we look at Slide 9, there are several mandates. Sorry, yes, -- if you could help us understand where we can see the first deal in the various markets in 2024. So which are the portfolio that will be signed in the first month of 2024?

I will get to the question on the ancillary. As you know our strategy is to continue to diversify our value -- will continue working to try to increase the [indiscernible] set related to the GBV dynamics. In Greece, we were working on a project since 2 years to service our clients [indiscernible] increase in 2023 revenues, and we will continue to be there also in the next year around EUR 2 million, EUR 3 million more versus [indiscernible]. And also, we -- as you know, we are working very well in the areas in [indiscernible], where we were able to grow a lot in the last 2 years, we continue to have a positive impact on our revenues. We have continued to help our clients to sell properties at the assets in a very positive way.

Regarding the evolution of GBV, when the other -- on the column is -- these are contracts which are already secured, and they don't include -- and their primary where they don't include the dynamic of the secondary because the dynamic of the secondary is just to explain better charts [indiscernible] go into the new mandates, but also in the disposals. So of the secondary transaction, which [indiscernible] the GBV over time, they don't pass through that column. So not having new primary there doesn't mean that the transaction will not happen to sustain the revenue with the disposal and the diversification of client base. Regarding the pipeline, differently from what we have said before, there are actual projects which now have started in the market, which we were ready for. So the [indiscernible] has been officially launched by the government and is split into 3 parts. And we are working on all of 3 for potential bid with a different investors for the different portfolio. As you recall, this project was before altogether. It was very factful that has a lot of different assets inside, which now [indiscernible] to address different more sales clients. On the other side, the [indiscernible] in Greece has been renewed by -- with approval by [ DCB ] 3 weeks ago. So 2 banks have announced publicly that they will pursue other transactions in that space. normally Eurobank and NBG, which have announced publicly about the sales process on that front. So different from before, these are actually on track now for execution. On the Italian side, you might have offset and recommended in the past about the unfold change in strategy in terms of outsourcing where we see opportunities for the servicing industry, which will probably concentrate more outsourcing, but also the amount of [indiscernible] guaranteed loans, which in the market of around EUR 200 billion and are experiencing a default rate, which is higher than the average, also because the banks reported the full ratio includes our drop of the guarantees. So as soon as they are realized the default or the challenge they have passed through NBG or such to apply the guarantee. So the government is obviously looking at solutions for the mounting level, which we realize next year and the following year. These are, I would say, the most [indiscernible] undergoing activities. On the other side, we announced last month, the new intake and the good features about the activity [indiscernible] that recurring. So despite not being under the traditional umbrella of the long term, the new contract is ongoing the charter of new flows from them to us to manage and bring back to [indiscernible], very much similar to what we do in the Greek market.

The next question is from [ Davide Giuliano ] with Equita.

I have just 2 of them. First, can you confirm approximately EUR 21 million cash disbursement in Q4 for the put option related to Santander, which was exercised in Q4? And do you think that the exercise of the put option may pose risks to the renewal of the contract you have with Santander, which, if I'm not mistaken, will expire in 2025?

The exercise of the put does not affect in any way the ongoing contract between doValue and Santander, [indiscernible] that is influenced in any way the discussion around the contract renewal. doValue remains strategic partners on NPL with which Santander [indiscernible] a strong and positive relationship also thanks to the proven performance in managing the flow business. Just to give you an example, the same has happened with Santander with other partnership after an initial phase of investment in [indiscernible], for example. And this is similar to other than behavior [indiscernible]. The full control of Altamira will simplify the control chain in the group and will enable to value the size the full strategic and management control on the key markets of Spain and Cyprus. Cyprus is a very profitable market for us and faster in the integration. And the food control, we also simplified the structure of the doValue Group, facilitating the strategic option, restructuring, financing and minority leakage in this market. So all in all, the Santander with focus on the performance for the renewal rather than the point of ownership.

[indiscernible] amount was the EUR 21 million you were referring to rebate in October...

Which is included in the guidance for the expectation of the leverage.

The next question is from Nikita Fedyuk with Sound Point.

Can I clarify, just a follow-up on one of the questions? In terms of the Q4 EBITDA guidance. So just using the full year number, I am getting to the kind of expected growth in Q4 EBITDA plus 20% to plus 40%. I wanted to ask this EUR 175 million, given the already like mid-November, do you have very good visibility that you're going to get there and then everything else that will be the potential upside from this number?

This is what I was referring before. I think it was a question from Azzurra. It's driven by transactions, which are already in the market, and we are managing in the execution phase for the secondary transaction. And then it relates to the cost exercise that we have already carried out, so we are seeing just the effect on the cost exercise. And finally, related to the portfolio, we have already ordered and started to earn revenues. So the guidance reflects a fact that have already happened.

So in other words, it won't be less than EUR 175 million.

Yes, correct.

And second point, in terms of the bond. So I see that your 2025 bond is quite -- maturity is quite soon. And given all the volatility in the market that we've seen, I think if I'm not mistaken, it was mentioned previously that there -- you are looking to refinance it quite soon.

So the point is that the maturity is almost '25. So it's not so close in our view. But because we want to have refractive approach, we will definitely look to market opportunities ahead of time with [indiscernible] funds, as we have done in the past when we look to financing.

And if I'm not mistaken, I think it was mentioned that the refinance will happen either this year or early next year or I'm making it up.

But this is natural because if we have the maturity, we will have to refinance [indiscernible] but we have more almost 24 months [indiscernible] August 2025.

And in terms of '25, kind of from the audit perspective, [indiscernible] refinance at least 1 year ahead in order to get all this [indiscernible].

[indiscernible] because I didn't understand your point.

Typically, given the audit [indiscernible] of the accounts and [indiscernible] of the company, most of the issues refinanced at least 1 year ahead [indiscernible].

Basically, it's a good practice to refinance ahead of schedule. But as Manuela said, Nikita, we are almost 2 years ahead of our upcoming maturity 2025. I think what we were trying to say is that, obviously, we're keeping our eyes on market conditions. And obviously, we will be prepared to tariffs of the market when we see an opportunity for that to happen. But obviously, that means simply that we will be prepared to tap the market if we see positive market conditions. In terms of our audit, I mean, obviously, the perspective we need to have all the figures within it, whether these are LTM, 9 months, or full year figures, that also will depend on the [indiscernible] market. But obviously, the perspective [indiscernible] figures.

And so the way how I should be looking at it? Is it something that will happen, let's say, in the near term? Or you don't see any pressure from that perspective and it can be pushed out...

We don't feel any pressure now, Nikita.

And then second point, also a third one in front, I can see there was some bond buyback program [indiscernible], are you planning to do any bond buybacks in future.

Not as of today. The brand is [indiscernible], but no we stopped. As of today, we are not planning any bond buyback [indiscernible] continuing to this according to our plan. I think there are no more questions, operator. So we with that we would like to thank all of you for attending the call. Please reach out to me for any further follow-up questions.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.