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 Preliminary Full Year 2024 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Daniele Della Seta, Head of Investor Relations. Please go ahead.

Good morning. I'm Daniele Della Seta, Head of IR at doValue. Today, I'm pleased to be joined by Manuela Franchi, our Group CEO; and Davide Soffietti, our Group CFO. We are very excited to share with you the preliminary results of what has been a truly remarkable and important year for doValue. Following the successful completion of a landmark M&A transaction and a well-received rights issue, we are proud of the outcome of a year full of achievements and progress. Today's agenda will be as follows: Manuela will start by providing an overview of our results, together with insights into the latest market and business trends. After that, Davide will give a detailed review of our financial performance for the period. At the end of our presentation, we will be happy to answer any questions you may have. Thank you for joining us today. I will now hand over to Manuela to begin.

Thank you, Daniele. 2024 has been an important year for doValue, marked by strong business growth and strategic progress, including the successful completion of the Gardant acquisition and the rights issue. We are proud to report that we achieved around [ EUR 10 billion ] from new business, surpassing our annual target of EUR 8 billion. The start of 2025 has been equally positive with 70% of the annual target already reached in the first 2 months of the year. This demonstrates our solid market position and continued trust of clients versus doValue, reinforcing our leadership in the industry and growing market share. Just 2 months after the closing, we are already realizing revenue synergies from the Gardant acquisition, driven by the value-added services we are providing to Gardant customers. This highlights the effectiveness of our well-executed integration strategy, which is delivering not only improved profitability, but also the revenue diversification targeted in our business plan. Our EBITDA, excluding non-recurring items, stands at EUR 165 million, fully in line with our guidance. This includes 1 month of Gardant contribution. However, we successfully achieved our guidance even on a stand-alone basis, considering the guidance provided for doValue and Gardant, both in terms of revenue, EBITDA and free cash flow for H1. This demonstrates the strength, resilience and consistency of our core operations. On the cash flow side, we exceeded expectations for leverage, achieving a ratio of 2.4x compared to the anticipated 2.6x on a pro forma basis. This was driven by strong cash flow generation from all areas of the consolidated perimeter and underscores our solid financial discipline and ability to deliver, as outlined in the business plan. We also optimized our capital structure by redeeming the 2026 notes and successfully issuing new 2030 notes worth EUR 300 million, strategically positioning us for future growth and financial flexibility. In summary, our strong capital structure, robust cash flow and the ongoing integration of Gardant are driving our solid performance and support our expansion strategy. We are confident that these strategic initiatives will continue to generate value for our shareholders. Moving now to Page 3. We can see that GBV intake from new business in 2024 exceeded our annual target by 25%, reaching EUR 9.9 billion. This strong performance was mainly driven by excellent results in Greece, where doValue has secured over 70% market share on all primary market deals closed in 2024. In Italy, we grew our market share despite strong competition, and we expect to benefit from the ongoing consolidation process, supported by the Gardant transactions. In Spain, despite being a smaller player, we captured over 20% of all NPL deals so far this year. On forward flows, we recorded EUR 4.3 billion, which is more than double the initial target of EUR 2 billion. Regarding secondary mandates, we retained servicing on 100% of the portfolio after secondary market transactions with a total of EUR 2.8 billion in GBV. This was a strong result, especially considering the competitive landscape and also accelerates our fee generation from our existing GBV, thanks to the [ sales ] fees and to the advisory revenue. Lastly, as part of our strategy to diversify revenue streams, about 35% of new mandates in '24 were non-NPL assets, including UTP and other asset classes. This is an important step as these assets typically offer higher margin, supporting a more profitable revenue mix. Moving to Page 4. We can see the progress on business intake in '25. We have already reached 70% of our annual target in the first 2 months of the year, thanks to the Alphabet mandates in Greece and the Tier 1 outsourcing contract in Italy for a significant portfolio. Looking ahead, we have a solid pipeline of EUR 35 billion projected over the next 18 months, with the most important deals expected in Italy and Spain. In Italy, a particularly important opportunity is linked to the collection of tax receivables where there could be a new law reforming tax collection activity today carried out primarily by the state. We believe that as a reputable market leader, doValue is well positioned to capture this opportunity, which will not only diversify our portfolio, but also significantly increase GBV. Moving to Page 5. We focus on synergies and integration, which are a key part of the value creation strategy for the recently completed acquisition of Gardant. As you may appreciate, doValue has extensive experience in managing complex integration processes, involving a large number of resources as demonstrated by our track record, especially in Italy. This experience give us confidence in our ability to effectively integrate Gardant and achieve the planned synergies. The Gardant acquisition come with a clear and tangible synergy plan, fully within doValue control and not dependent on external or uncertain market conditions. This makes the execution highly predictable with clear and measurable targets over a 3-year period. Also, considering our track record of such integration, specifically in the Italian market. We began implementing the plan immediately after the acquisition, and we have already realized part of the synergies in '24, just a few weeks after closing. This was made possible by careful advanced planning, which allowed us to move quickly and efficiently. In '24, we signed contracts for value-added services, increasing projected revenues and optimize our workforce, avoiding EUR 9 million in redundancy costs by redeploying existing resources. The plan continues in '25 with HR synergies, IT migration and legal entity simplification, all of which are already underway. By 2026, we will have achieved consistent HR cost discipline, completed the IT integration, optimized office space and finalized legal entity simplification. We are well on track with 20% of synergies already executed and an expectation to reach 40% by 2025. Our experienced and proactive approach ensure we are fully prepared to capture the full value of the Gardant acquisition. Moving now to Page 6. We review the progress made during the year on the delivery of our business plan assumption we shared in March. As shown by our results and market developments, our assumptions were reasonably set and conservative in nature and target tangible. Starting with GBV, we targeted EUR 8 billion new business per year, and we exceeded this target significantly, reaching EUR 10 billion of new business in '24. We expect to maintain this positive momentum with '25 poised to hit the target as well. In our business plan, we put particular emphasis on what we call the engine 2 of growth, a set of initiatives designed to increase our growth profile by venturing into adjacent sectors with opportunities and synergies beyond our core business. After almost 1 year, we have delivered on most of these initiatives. We established a mortgage broker license business unit in Greece, which is already generating revenues. Our digital platform for self-service capability in Greece is live and operational, enhancing customer experience and operational efficiency. Additionally, our alternative asset management project has been accelerated significantly, thanks to the Gardant acquisition, which brought in an asset management company with EUR 750 million of assets under management, providing a solid foundation for future growth. Our business plan envisions a refinancing of the previous bond maturing by the summer of '25. We are pleased to report that this target was achieved ahead of schedule. The '25 bond was refinanced with a term loan in December '24, and the '26 bond was refinanced with a new bond issuance in February '25. The successful capital markets operation were well received by investors with significant oversubscription of the new notes, reflecting confidence in our strategic direction and financial strength. As for the 2024 targets, we achieved a pro forma net leverage of approximately 2.4x, an improvement compared to our initial forecast of 2.6x. Our gross book value reached EUR 136 billion as of December 2024. We recorded EUR 479 million in gross revenues with an EBITDA of EUR 165 million. All financial targets were reached also on a stand-alone basis. Finally, moving to Page 7. Before handing the floor to Davide, let's recap on the milestone we achieved. We have made a strong start to 2025 across all strategic areas, positioning ourselves well for continued growth and success. In the Hellenic region, we secured EUR 3.9 billion in new GBV mandates since the beginning of the year. These results underscore the strong market demand and our solid positioning in this region. Italy also delivered robust results with EUR 1.5 billion in new mandates since the start of the year. In addition, we secured EUR 0.4 billion for master servicing, reinforcing our leadership in the Italian market. We also made significant progress on the capital structure side, issuing the EUR 300 million bond with a 7% coupon and 2030 maturity. The bond was oversubscribed by 6x, reflecting strong investor confidence in our strategic direction and financial strength. The successful issuance not only strengthen our balance sheet, but also provide us with the financial flexibility needed to pursue further growth opportunities. The integration of Gardant is progressing smoothly. We are already providing value-added services to Gardant clients, leveraging our operational expertise and industrial knowledge. Additionally, we are servicing Gardant's GBV through doValue FTEs, optimizing our workforce and operational efficiency. This integration is a key milestone in our strategic road map and is expected to generate significant synergies and value creation. On the synergies front, we have already realized 20% of the planned synergies as of first Q 2025. Looking ahead, we expect to reach 40% figure by the end of the year. These efficiencies are driven by our disciplined approach to the integration and our focus on operational excellence. Overall, our strong start to 2025 demonstrates our commitment to delivering sustainable growth and creating value for our stakeholders. We remain focused on executing our strategic initiatives, enhancing our operational capabilities and driving long-term value creation. With this, let me hand over to Davide to cover the financials in more detail.

Thank you, Manuela, and good morning to everyone. So let's dive into the financials for 2024. Moving to Page 9. We have a summary of the full year financials. Overall, we are pleased to report very positive results, reaching the high end of our guidance for both revenues and EBITDA. It is worth highlighting that Gardant contributed for just 1 month to the group results. And even without this effect, doValue delivered results in line with expectations. Gross revenues in '24 were EUR 479 million, stable year-on-year, thanks to strong ancillary revenues that more than compensated for a lower level of sales in Greece and reduced revenues from REOs in Spain. EBITDA, excluding nonrecurring items, was EUR 165 million, at the high end of our guidance, although 7.8% lower than 2023. This decrease is mainly due to fewer disposal and unfavorable comparison base linked to the release of provisions for former CEO MBO. Greece continues to be a strong contributor with structurally and sustainable higher margin, driven by above group average fees, thanks to the high level of market consolidation and lower than group average cost base. The EBITDA margin is in line with the guidance we gave during our Capital Market Day. Net income, excluding nonrecurring items, was EUR 7 million, which is EUR 5 million higher than 2023, mainly thanks to lower [ G&A ] and impairment versus 2023. Moving now to Page 10. Here is a breakdown of our gross revenues by region. At group level, gross revenues were approximately flat year-on-year as lower disposal were largely offset by higher ancillaries, further increasing diversification of revenue. Indeed, non-NPL revenues in 2024 amounted to 35% of gross revenues. On track to reach the 40% to 45% target outlined in the business plan by 2026. In Italy, gross revenues were up by 11.6% year-on-year. Gross revenue dynamics were positive even on a stand-alone basis, driven by positive ancillary revenues and the pickup in NPL collection in Q4, which offset the seasonal weakness in the previous months. In the Hellenic region, gross revenue slightly declined by minus 3% year-on-year, mainly due to lower disposal in Greece. Lower NPL and UTP revenues were partially offset by positive dynamics in value-added services. In Spain, the decline was mainly driven by real segment due to delays in the debt recovery proceedings in an overall challenging real estate market, leading to decline in gross revenues by 20%. Moving to Page 11. We are pleased to show that we continue to effectively manage our cost base, leveraging on ongoing efficiency measures across the group, both in personnel costs as well as IT and SG&A expenses. Total operating expenses were EUR 268.2 million in 2024, showing only a minimal increase. This is remarkable considering the initial consolidation of Gardant, a significant EUR 5.9 million one-off effect with the reduced HR cost in 2023 and wage inflation in Italy for the renewal of national collective banking agreement. Despite these challenges, we have maintained strong cost discipline across the group, particularly in Spain, where we achieved a minus 19% reduction in operating costs, preserving profitability even with subdued revenues. HR costs were up 4.9% versus 2023, mainly due to the Gardant consolidation. On a stand-alone basis, we successfully decreased HR cost in Spain and in Italy despite the one-off positive element in 2023 impacting the base a significant wage inflation in Italy in 2024. The Hellenic region was impacted by the expected increase in HR costs due to the onboarding of new portfolios. Worth reminding that HR cost increase in Greece was flagged also at the Capital Markets Day back in March. When it comes to IT, real estate and SG&A expenses, we reported 3.1% decline year-on-year, thanks to effective cost discipline practices implemented at group level. Spain has been the most notable driver with a minus 29% decrease in operating costs. In summary, we remain confident on our ability to improve margins, thanks to our cost-saving initiatives and the synergies from the Gardant integration. Moving to Page 12, EBITDA, excluding non-recurring items for the group was EUR 165 million, at the high end of our guidance range. Although this marks a decline of 7.8% versus 2023, it is important to highlight that this was due to the postponement of a certain disposal in Greece and unfavorable comparison based linked to the aforementioned release of provision for former CEO MBO. The EBITDA for the Hellenic region was impacted by higher HR costs and by lower net revenue driven by lower disposals. Marginality improved in Q4, in line with the seasonality pattern of collection driving higher revenues. The EBITDA margin in the region was 53.7%, approximately 20 percentage points higher than the group level, driven by the higher base and collection fees in the highly concentrated market and lower workforce costs versus other countries. In Italy, EBITDA remained stable as the positive gross revenue dynamics from an acceleration in collection in the fourth quarter, which were previously expected in Q1 2025, were offset by the increased outsourcing and HR costs from Gardant. Nevertheless, effective cost discipline measures mitigated the significant wage inflation and the one-off effect from the former CEO's MBO. In Spain, EBITDA is once again in positive territory as continued efforts in cost discipline measures allowed to fully offset the decline in REOs. Moving to Page 13, we highlight that EBITDA is translating into a positive reported net income of EUR 1.9 million or EUR 6.7 million net income, excluding nonrecurring items. This is a positive outcome, showing our ability to maintain profitability even with the lower EBITDA, excluding nonrecurring items. Breaking down the number, we faced higher nonrecurring items due to the costs related to the Gardant transaction. We had a lower write-down on property and plant equipment, intangible, loans and equity investments in line with the collection costs, also supported by the lower impairment, partially compensated by negative impact from the disposal of doValue Portugal. Financial interest and commission increased, driven by the new term loan funding of the Gardant transaction, partially offset by a EUR 2.7 million positive effect from the interest component of the tax claim in Spain. Income tax for the period was positively impacted by favorable comparison base due to DTA write -offs in '23 in Italy and Spain. The positive impact on net income by the Spanish tax claim is worth EUR 22.7 million. Finally, minorities were mainly related to doValue Greece. Moving to Page 14, let's have a look at the cash flow dynamics. Cash flow from operations in 2024 came in 60% higher than 2023 at EUR 83.7 million. Cash conversion achieved a remarkable increase in 2024 at 54% versus 44% in 2023. This positive result was achieved thanks to a notable reduction in net working capital, thanks to continued control of the invoicing cycle and positive dynamics in advance payment. CapEx was slightly higher than 2023, in line with the investments in the digital platform outlined in our business plan. Lease payments slightly increased versus previous year, while cash out for redundancies was lower than expected, thanks to the deployment of doValue's employees to service Gardant's assets under management. Other change in other assets and liabilities decreased by 55%, EUR 17.7 million lower, in line with the trajectory of normalization we envisaged for the coming years. Free cash flow was in line with the previous year at EUR 28.2 million, implying a significantly higher conversion given the EUR 20 million lower EBITDA in 2024. Stable free cash flow was a notable result, especially given the increase in financial charge related to the new term loan and the additional charge linked to the redemption of the 2025 senior secured notes in December. Investment in equity and financial assets remained stable since the 9 months result at EUR 3.4 million, of which EUR 0.4 million referred to the acquisition of Team4 in Spain in 2023. Other EUR 3 million include the cash linked to arbitration in Iberia, offset by the payment for earnout in Spain and the disposal of Portugal. These were partially offset by EUR 2.8 million inflow from financial assets. Finally, the impact related to the Gardant transaction amounted to a net outflow of EUR 63.6 million, including the cash consideration paid for the acquisition, the cash inflow from the rights issue and the related transaction costs. On Page 15, we show our net debt and leverage position for 2024. At the end of the period, net debt stood at EUR 515 million, up from EUR 494 million recorded at the end of September 2024 before the Gardant acquisition. During the fourth quarter, we successfully raised EUR 446 million term loan and EUR 8 million revolving credit facility as part of the Gardant transaction, for which cash consideration paid amounted to EUR 180.6 million, net of the Gardant net debt. Additionally, we redeemed the EUR 265 million 5% senior secured notes due 2025. We closed the year with a solid cash position of EUR 134 million, up EUR 30 million since September and enjoy liquidity buffer of EUR 264 million, including undrawn revolving credit facility lines. Net leverage at the end of December was at the level of 2.4x on a pro forma basis with 12 months of Gardant EBITDA, better than the 2.6 level we had guided and better than the 3.1x level at September 2024 before the Gardant acquisition. Leverage was also supported by the acceleration of our collection in Italy, previously expected in 2025, which supported EBITDA. Staying on this topic, on Slide 16, we are pleased to present our newly streamlined capital structure following the extension of all our maturities. This is a significant achievement that strengthened our financial position and reduced refinancing risk. As mentioned earlier, in November, we secured a EUR 526 million financing package, including EUR 446 million term loan and EUR 80 million revolving credit facility as part of the Gardant transaction. Part of the term loan, which is amortizing and due 2029 was used in late December to redeem the 2025 secured notes, significantly extending the duration of our debt. Additionally, at the beginning of February, we successfully issued a new EUR 300 million bond due in 2030, which was met by very strong demand, achieving over 6x oversubscription. We used the proceeds to refinance the 2026 senior secured notes, practically eliminating short-term refinancing risk until for the next 4 years. We remind that doValue continues to have one of the lowest leverage ratios in the industry and was confirmed in the last [ data issuance ], its stable corporate rating BB stable outlook, despite wave of downgrades among peer group. Turning our attention now to Page 17, we give the guidance for doValue in 2025 and confirm our 2026 business plan targets. In 2025, we expect a gross book value between EUR 130 billion and EUR 135 billion, leading to gross revenues in the EUR 600 million to EUR 615 million range and EBITDA in the range of EUR 210 million to EUR 220 million. Synergies from the integration of Gardant are expected to contribute in line with expectations. Free cash flow to serve dividend and principal repayment can be expected in the EUR 60 million EUR 70 million range as financial leverage should land at 2x EBITDA. Thank you all for your attention. We will now take your questions.

The first question is from Tommaso Nieddu of Kepler Cheuvreux.

I have 2. One is on the numbers. Certainly, they were quite positive, but I'm struggling to understand the dynamics below EBITDA. So maybe you can give us more color on that and perhaps you can extend that also for the next years, just to understand where we should land in terms of bottom line. The second question is also on the strong results from ancillaries, which I would say managed to offset the NPL servicing. So, what kind of growth we should expect from it in the next years? And how much of this we can consider somehow recurring? And then just, just a quick one on M&A. Recently, there have been some rumors on a potential acquisition in Spain. I mean, I do understand it was just a speculation, but I would like to know your thoughts on other M&A activities, despite obviously being focused on deleveraging and the integration of Gardant.

Okay. I will take the first question. Below the EBITDA, we have mainly the roughly EUR 73 million which are net write downs on property, plant, equipment and intangibles. This EUR 73 million, we expect in 2025 a higher number because we are including also the amortization from the Gardant acquisition. For 2024, we just have included 1 month of amortization for the Gardant acquisition that's worth roughly EUR 2 million. So, next year will be higher, more -- including the full impact of Gardant. Then we have the provision for risk and charge. We have included in 2024, it's EUR 18 million, and we have the impact, as I was mentioned before, on the EUR 3 million average of the selling of the Portugal branch. Then we need to consider the financial charge that were net EUR 29.5 million and the results of the financial asset at fair value that are EUR 3 million. Of course we need to add the tax impact. It has been positive impact by EUR 20 million coming from the tax claim in Spain, and we pay -- we have a tax of roughly EUR 32 million. So, the net impact is EUR 12 million. And then you need to consider also the minorities that is EUR 12 million that are mainly related to the Greece minorities. Next year, we'll have also the Gardant minorities.

Regarding your second question on ancillary, this is pretty much one of the main driver of our business plan to grow significantly other businesses. So, we wanted to perform obviously well on our core business. But all the countries made an effort to grow the other products, which are data products, master servicing, legal services, real estate services. This has been particularly important, especially in Italy and in Greece. So definitely, they will be recurring for certain of them, given that there is a trend in growing this product line. For some others, it depends on the projects you make. For example, on the data quality side, we provide services to banks sometimes or to investors to clean up their portfolios, and they are more one-off. But all in all, clearly, we are focusing on growing all the ancillary across the various items we have indicated in the presentation. More on that will be in 2025, given that the Advisory division and Mortgage Broking division have been set up and are operating. If you remember, the Advisory division was set up in April and recorded already in 2024, EUR 2 million of EBITDA. So, it can only go better from there. The mortgage broking received the approval from the regulatory in October and is already secured in the first 2 months of the year, significant leads from the main banks increase. In Italy, we have a lot of ancillary, which we used to have in the past and pushed even forward in 2024. Moreover, we signed the contracts to offer these services to Gardant clients, which we were outsourcing them from the market. And this is realizing part of the revenue synergies in our integration plan. On the last point on M&A, clearly, the market is in consolidation mode as we had anticipated. So, given we are the largest operator in the market, we are often associated to some of these transactions in the market. And we look to transaction in the market. Our focus, as we promised to investors on integration and deleveraging is of paramount importance. And I think the results of 2024 are showing already very good direction in that front, because as the colleagues have mentioned, only in the first month of the year, we already recorded 20% of the revenues of the synergies from the integration. We have done 4 of these integration already in the Italian market. So it's 1 more, we know what to do basically. And on the deleveraging part, I think the fact that we exceeded the expectation is a good sign. We obviously want to do better in 2025, taking into account then in the pro forma 2.4x leverage, we also include some cost that we paid actually in January related to fees for the transaction. So otherwise, the leverage would have been even lower. But given that the transaction was closing at end of last year, we wanted to include them as higher debt and lower cash in the numbers we provided to you.

The next question is from Simonetta Chiriotti of Mediobanca.

I have 3. The first is, if you can provide a pro forma number for 2024, including Gardant since the beginning of the year? And second question, looking at 2025 targets, if you can walk us through like the bridge between the EUR 210 million, EUR 220 million EBITDA and the EUR 67 million free cash flow. And finally, on Spain, if you could tell us if there have been progression there in your market position? And how do you see that market in 2025? And also, you have mentioned some advanced payments that had a positive impact in 2024. I mean, do you expect this to have a negative impact in 2025, if I've understood correctly this dynamic?

Thank you Simonetta, for your attention. The pro forma EBITDA was around EUR 210 million for 2024 with overperformance vis-a-vis the stand-alone guidance of both Gardant and doValue and both on revenues and EBITDA. On the 2025 targets, Davide will drive you through the conversion to free cash flow. I would move to the other 2 questions before I leave the space to Davide. The Spain has been -- we have closed, obviously, last year, the restructuring, the clean-up of the perimeter with the sale of Portugal. It was part of the Iberia perimeter, and also the closing of the business related to real estate development. So, we have a stabilized and efficient -- more efficient cost structure. As you have seen, the business has progressed in terms of new intake very well, last year compared to the market share. In Spain, we have 6% market share of GBV, but we gained 20% of the mandates in the market. One of the positive points of this business has been the acquisition at the end of 2023 of the little company called Team4, which has helped, one, to internalize the outsourcing costs on the small-ticket unsecured. And second, to gain relevant contracts, not only from new banks like BBVA. You remember, we have just started to work with Sabadell, which has given us, during the course of last year, around EUR 1 billion of asset to manage starting from end of 2023, where they were around EUR 300 million. obviously, with Caixa as well, where we had started to work the previous year. But Team4 is also very active in the non-banking receivables. So works with the like of Amazon, PayPal and utilities. And this is an area of growth that we want to capture through our digital platform. And that's what we have launched already in Greece and we'll be launching in Italy and in Spain in the first half of this year. This drives us automatic and digital collection, especially in certain segments where traditionally we go with -- the market goes with the call center type of approach. and opens up to all the non-banking receivable, all the tax receivable business and the state receivables in general. So, it's a completely different dimension to our traditional one. And this is also why we have pushed on this business. And Spain, on that front, has already the platform, so is able to capture it earlier on. In terms of advanced payments, probably there was a misunderstanding. The advanced payments were in the years before in '24, so in '23. So in '24, it was normalized the progress. So we had anticipated cash in '23. So this positive impact was not in '24. So '24 was real cash generation that is progressing, obviously, in the first month of this year with the targets we have given for the full year. Davide, please, if you can explain...

Yes, sure. Just starting from the guidance, we have given to the market for 2025, assuming to be in the middle of -- EUR 215 of EBITDA. We need to consider the CapEx and will be roughly EUR 30 million because we are including also the integration costs we have already announced for the acquisition of Gardant. Then we need to consider the IFRS 16 that is EUR 17 million to EUR 18 million. We have also redundancy costs always related mainly to the Gardant acquisition plus certain redundancy we are doing in Greece and in Spain after the investment in innovation we have done. We are continue to do also during 2025 is roughly EUR 15 million. On top of this, we need to reduce the operating cash flow from financial charge and tax is expected to be roughly EUR 75 million. And then, we need also to consider the reduction of the payment of the earnout that was due at the end -- which is due now in the first quarter of 2025, that is EUR 12.5 million. And we also expect some positive outcome in terms of working capital dynamics, thanks to our control over the working capital, it would be EUR 5 million. So through this, we should get to the EUR 70 million of free cash flow we have guided the market.

The next question is from Davide Giuliano of Equita.

The first one is on the ongoing bank consolidation. Is there any impact from bank consolidation on your flow contracts with Banco BPM and BPER? And is there a possibility to potentially lose or automatically acquire new NPE flows following the ongoing consolidation? The second one is on tax credits. We saw an acquisition by AMCO in credit collection for the public administration over recent days. Are you interested in this type of business, particularly in servicing tax credits? And do you have any potential expansion in pipeline in this regard in Italy? And the third one, sorry, maybe if I missed it, can you please provide us the revenue and EBITDA from Gardant that was consolidated in the quarter?

Yes. So, Davide, thanks for your question. On the bank consolidation, usually how this contract work, I'm talking in general, clearly, but it's pretty much applicable to flow agreements in the sector. Clearly, the companies which work for banks who are the target tend to have clauses where if the acquirer wants to exit these contracts ahead of time, we'll have to pay a large indemnity that repays the residual value of the contract, usually the people have to go back to the bank. So, you have double cost to close this contract ahead of time [Indiscernible] company working with the target to include the flows of the target. So, in case you are passive, you are protected from exploitation of the contract. In case you are an acquirer and the target doesn't have contracts, you have the possibility to expand. So all in all, it's a positive -- it's neutral to positive. Clearly, in this type of transaction, banks tend to clean up their balance sheet in a combination, so this should produce additional flows. On the second point, you touched a very relevant market trend in the Italian arena. But it's not only in Italy because we are seeing interest to manage externally the tax credit also in other jurisdictions. Clearly, as you have seen also from several articles in the press, in the Italian market, the state is looking to see if there is a better, more efficient way to recover tax credit. The pile of tax credit is huge, is around EUR 1.2 trillion. Let's say, even if a small portion of it, which is something that has been written, EUR 100 billion was served by this industry would be a very attractive opportunity. So obviously, we are keeping ourselves to manage these type of credits. They have acquired a little company that specialize in it. These are companies which have less than EUR 1 million EBITDA, all of them. So we are talking about something marginal. It's more like a license. But we have already managed as doValue and Gardant in the largest pension credit and tax credit securitization done by the Italian state in the past. A remarkable one was with the [ IMPS ] tax credit in 1999. So clearly, we would like to have a role into this process. As you have seen, vis-a-vis AMCO, we have reached a very relevant piece of the outsourcing they've allocated to the market. So we are very happy about the collaboration with them. On the revenue and EBITDA, the Gardant has contributed around EUR 7 million of EBITDA, [ 1, 7 ] and around EUR 15 million, EUR 16 million of revenue.

The next question is from Davide Rimini of Intesa Sanpaolo.

I have 3 questions for you. The first is on the guidance that you've given and the usual seasonality that your business seems to have during the year. I was just wondering, you also commented a strong commercial activity, and I just wondered whether you would expect the same seasonality as happened last year. The second question is, whether you might provide additional more color on the performance you have collected in Greece and more specifically on the reference on the lower secondary sales that you have registered and whether you would expect in 2025 to reverse? And the last point, and the last question, sorry, was on slide -- I think, still on the guidance on Slide 17, actually 16. So whether sort of on the dividend distributions, there is no reference on 2025, and given the free cash flow guidance that you provided today, at which point in time of the year you would be probably more inclined to give more light on that front?

Thanks for your questions. On the seasonality effect, we added a page in the back, given that we are often asked this question, so we wanted to give a reminder of the seasonality on Page 19. So clearly, the business also of Gardant has similar trends. So clearly, we see as a fourth quarter that is stronger than the others as it has historically happened. Last year, we had promised in November when we announced the 9 months that 4Q would have been a strong quarter. And this is also evident from the numbers from the following page or Page 20, probably even stronger than the previous one. The previous year even clean of the Gardant effect. On the other side, the possibility to anticipate a lot of the new business at the beginning of the year. And this links to your second question about the commercial activity. Last year, we were around November already at EUR 8 billion, and we went to EUR 10 billion at the end of the year. So many of these portfolio were onboarded in the second half of the year. Today, we are already at EUR 5.4 billion beginning of the year, and all of them have been onboarded or will be onboarded by the month of March. So you are anticipating this effect. And because of the activity we are seeing in the market, we expect to reach the target of EUR 8 billion already in the first half of this year. So, obviously, trying to surpass that target in the second part of the year. So, we will not wait October or November. In terms of performance of Greece secondary sales are not under our control in the sense that it's not a question of, is the investor buy or not buy this portfolio, it's more about the seller when he wants to sell the portfolios. So we are planning at the beginning of the year about the sales we would do, anticipating the behavior of our clients. Sometimes they want to sell and based also on the -- what the app structure already considered, sometimes they want to sell right away at the beginning of the year, sometimes more at the end. So these sales not done this year will be recovered in the first part of 2025 because they are in the pipeline. They just -- the seller is activating them a little bit later. And they take the normal time to be -- to do the due diligence from the buyers to put the bids so on and so forth. About the dividend distribution, if this was the last question, we have indicated 50% to 70% of reported ex-NRI net income which is around this year around EUR 25 million of dividends, pretty much based on our estimates. Then with plus and minuses. Obviously, more the year progresses like by the third quarter, probably we could have more visibility on confirming the precise amount.

The next question is a follow -up from Simonetta Chiriotti of Mediobanca.

On this tax credit opportunity, I would like to understand better this type of market. So do you expect to receive mandates directly from the state or from buyers of these tax credits? And second question is on guaranteed loans, so NPLs coming from that type of loans. This was considered an opportunity. Can you update us on what's happening on that front?

Yes. On the first point, I think the Minister of Economy is assessing if they would like to do a securitization structure where they sell notes to investors and through a master servicing structure where they appoint a master servicer, which distributes the mandates or it's just acceleration of what today is collected by [ Agencias de trabajo ], which is a bit delayed in the process of collection. So that's why the state is anticipating it. There are different auditions at parliament. We had ours just 2 days ago where we propose several structure to them. And clearly, they will define which is the final structure. But the assignment, given that both in the case of a securitization structure or a direct assignment, we will always be driven by the state, given that it's a very sensitive area. On the guaranteed loans, this has been quite a topic last year. So, we have managed several portfolio with MTT guarantees. We are structuring also a contribution fund for MTT guarantees. Clearly, the amount of the defaults on this asset class has been low. So the state has had the urgency to -- has not had the urgency to accelerate recoveries given that the amount of default has not been very high. But of the amount transacted in the market last year on NPL in the Italian market, half of it overall was with these guarantees. So it has been obviously a clear trend in the market.

The next question is from Mario Coppola of Stifel.

Hello, can you hear me?

Yes.

Okay. Sorry, apologies. I have only one left, actually. I think you mentioned EUR 75 million of impact on cash flow from financial charges and tax. Does this figure reflect also the impact on the P&L?

P&L is slightly higher because it needs also to amortize the cost of the bond and the term loan. So this is the full cash outflow.

[Operator Instructions] There are no more questions registered at this time.

Thank you again for your attention. See you at our next call.

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