Tinexta S.p.A. (TNXT) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Tinexta Group Consolidated Results at the 30 of September 2023 Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Josef Mastragostino, Chief Investor Relations Officer of Tinexta. Please go ahead, sir.

Good afternoon, and Good morning to the folks in the U.S. Thank you for joining Tinexta's 2023 9 Months Results Presentation. Here with me today Oddone Pozzi, Group Chief Financial Officer. As a reminder, all the relevant documentation of the first 9 months 2023 results can be downloaded from our company website in the Investor Relations section. For the purpose of this call, I will go over the first 9 2023 highlights and updates. Oddone instead will go over the first 9 2023 financial results as well as the business unit's performance, providing us with a deep dive. The last part of the call will be dedicated to Q&A. A recording of this conference call will also be available on our company website, and it will be posted upon completion of this call. At this point, given that you all have the presentation, I will kick it off by turning to Page 4 of the presentation. Here, we have highlighted some of the key data. Revenues for the first 9 months came in at EUR 269.5 million, plus 9% versus prior year. EBITDA adjusted came in close to EUR 57 million, growing 4% versus prior year EBITDA on a reported basis came in at EUR 51 million or growing 5% versus prior year. Net profit at a reported base was EUR 48.5 million. Net financial position was EUR 91.5 million versus EUR 77.6 million of the prior year. Turning to Page 5. Aside from some of the numbers already commented, it is important to highlight that adjusted free cash flow of continuing operation rose by 11% versus prior year, adding EUR 40 million and even more significant is the adjusted free cash flow on an LTM base, which came in at over EUR 53 million, showing the group's continued ability to generate significant amount of cash. Net financial position grew versus fiscal year '22 to $91.5 million. Such increase is important to highlight is attributable to the acquisition of a minority stake in Defence Tech Holdings as well as ASCERTIA, which took place in the month of April and July '23, respectively. This was partially offset by the proceeds of the sale of ReValuta. Just as a reminder, which was completed on March 7 of '23. Net financial position over the last 12 months EBITDA adjusted came in sub 1x or 0.94x. In the first 9 months of the year, in a nutshell, Digital Trust continues very strongly with growing trends with growing trends. Revenues grew 14.4% with EBITDA growing nearly 15%. EBITDA margins to a historical high, almost close to 29%. Cybersecurity grew 15% in terms of revenue, even more, I would say, outstanding was the performance of the EBITDA on an adjusted basis, which grew 67% versus the prior year. This is, therefore, an extremely great result. We have posted resilient growth for 4 consecutive quarters with EBITDA margin reaching nearly 13%. Business Innovation grew fairly in terms of revenue with EBITDA reaching EUR 22 million and EBITDA margin close to 28%. Going to Page 6. As most of the comments of the numbers have been commented, I would like you to remind you that the comparative data for the first 9 months of '22 have been restated in relation to the completion in the fourth quarter of '22, of the activities identified in terms of fair value for the assets and liabilities of setup, consolidated November 1, '21. Evalue fully consolidated in January 1, '22 announced April '22, set up in May of '22, and planned and 9 in 1 consolidated as of July 1, '22. It is important to highlight that the results in the first 9 months of '23 include the contribution Ascertia Limited and its subsidiaries will go into the detail and Oddone will provide you all the back off of this. But it is important to highlight that the contribution is as of August 1. So it is basically August and September of the third quarter. Such contribution is shown as a change in scope, while as a result of the aforementioned merger the contribution of the '23 results of the acquisitions finalized during '22 is not functionally measurable and accountable as it changes scope for any further details, always refer to the interim report. Turning to Page 7. We think this is again on the other slide that we are proposing again in Q3. It is an important one because we would like to highlight the cadence and confirm that this is a back-ended EBITDA story with the fourth quarter, obviously having the greatest weight in terms of adjusted EBITDA. Again, we have confirmed that the average weight per quarter is absolutely in line with the average of the prior 2 years. At this point, I will leave it to Oddone to provide us with a deep dive on the results. Oddone?

Thank you, Josef. Good afternoon, everybody. Good morning to people is connected from the U.S. As anticipated by Josef results of year-to-date Q3 came aligned with our expectation, first. Overall, we got 2 business units, Digital Trust and Cybersecurity that continue the excellent -- has continued excellent performance for first 2 quarters. This was also confirmed in Q3, showing the steady growth of Digital Trust and a significant rebound of Cybersecurity. As far as concerned, business innovation, the situation is on track with our expectation. And we do expect quite significant important Q4 has occurred during Q4 2022. And this refers exactly to the last slide that Josef presented to you. If we move into the P&L. The P&L is showing growth in the range of above 9% for all the -- for the consolidated results of the group. In top 5 products and services, all our business units are represented. It means that revenue is well distributed between the companies and between the different business units. In terms of costs, we do see that service and other costs are growing less than the revenue, and this is bringing some contribution of profitability, while the personnel costs are growing more than the rest. This is something that we do see as a temporary situation as the Q4 is going to be the stronger quarter of the year where the absorption of personnel costs will be much higher than in the previous quarter. So we do expect at the end of the year, an improvement of profitability compared to the situation where we are. The EBITDA adjusted came in the growth of 4% compared to previous year. The LTI incentive as well as non-recurring costs are aligned with the previous year. EBITDA is at 19% compared to 19.8% of previous year for the reason I mentioned above. The level of depreciation and amortization that are linked to our investment policy in terms of CapEx is quite -- is increasing. This is the result of the continuous investment from our business unit. Digital Trust, cybersecurity and business innovation are continuing to invest in new solutions and products in order to keep very updated and fresh our portfolio of products and services. And this is showing an increase compared to the previous year. If we move to financial charges and income we do see here a quite significant improvement. So our capability to cover the financial debt, keeping it well below the current cost of money allow us to invest the cash available at the higher interest rates than the cost of debt. That is bringing up, as we can see, we recorded just in 9 months, EUR 5 million positive interest, while the negative interest grew compared to the previous year, and half of this was related to a couple of write-offs in terms of minority interest in some activity. Income taxes is aligned with our expectation higher than the previous year, but here last year, we had a tax relief related to the affrancamento we performed last year and there was already very clear explained last year. Results of this continued operation includes both in first 9 months, '22 as well as in first 9 months '23, the gain related to the sale of Innolva in '22 with a net gain of EUR 41 million and the gain of the sale of ReValuta in '23 with a gain of EUR 37 million after taxes. Capital investment of the group grew from the year-end, mainly is driven by the acquisitions and the consolidation of Ascertia from August 1, and this accounted for EUR 44 million as well as the acquisition of a minority interest in Defence Tech for which we acquired 20% of the stake for a value of EUR 25 million. For the rest there are no other significant changes. CapEx came at EUR 50 million on a recurring basis with EUR 9 million of amortization. Net financial position as Josef already mentioned is up, but only driven by the acquisition we preferred in the first 9 months. And free cash flow kept a very positive standard. And as we will see then with a significant growth compared to previous year. Shareholder equity increase for several reasons that we can see in here at Page 10, including the capital -- the completion of the second tranche of the capital increase performed by Bregal in Infocert. If we move to Page 11, I would say, very interesting is the growth of the free cash flow from continuing operations. The adjusted free cash flow excluding the non-recurring components went up in the first 9 months from EUR 36.2 million up to EUR 40.3 million. This means a quite strong capability to convert the EBITDA into cash despite the significant the increase of EUR 4 million that we have in CapEx compared to previous year. Basically, we were able to cash and to improve the working capital of EUR 6 million compared to previous year. And this is, for us, the confirmation of the quality of the services we are rendering to our clients and our capability to cash it. I move down, I would say, I will move to Page 13. As already explained this, over the last 12 months, if we look at the movement of the net financial position, the free cash flow from continued operation in the last 12 months is about EUR 43 million. Again, this is encouraging and confirmed capability of the group to generate cash from the operation. We were able to distribute dividends at EUR 33 million. Then the group went through several M&A operation, both as a sale as well as acquisition that, has changed this situation. We went through also capital increase with Bregal that I have just mentioned for EUR 30 million as well as the capital increase of Warrant Hub after the completion of the transfer of full value from Innolva that was sold to Warrants. Let's move now more into business deep dive. At Page 15, you are here, in just one page, this situation of the group with what I mentioned before, the very positive performance of digital and cybersecurity, why? For business innovation, we do expect, according to what also happened last year, a much stronger Q4 than the first part of the year. I move now to Page 16, Digital Trust. You know, what has already commented during past conference call or during meeting, we got together, it's now, I would say, 10 quarters that we are recording a steady growth in both revenue and even more the capability to grow faster in the EBITDA. This means that the size of Digital Trust now is quite significant. The revenue went up EUR 30 million, EUR 70 million. It means 14.4% with strong capability, with a quite interesting percentage of recurring revenue, and the continued capability to acquire large clients is one of the major. On top of this, both InfoCert and Visura are able to improve faster the EBITDA than the revenue. And I would say here the operating leverage is basically helping this situation. We do see also, although we start from small numbers, our capability to export on top of the business we do in the countries where we have already a local company there. We are ready to export to international clients our solution, and this part is growing, basically is growing 50%. Again, we're talking about small number, but this is a confirmation. Here, for the year end, we do expect to continue to grow at this, basically at this level, expecting to deliver results above the level what was, let's say, our original expectations. In cybersecurity, again, Q3 confirmed the positive indications of the first 2 quarters. Cybersecurity business now has taken a clear route of continuous improvement. And deep diving the figures, I would say within these figures, we do basically see our traditional business -- the traditional business, quite flat while all the growth is coming from pure cybersecurity services. This has occurred also in Q3 and compared to previous year, we do see significant growth in terms of revenue, well above the market situation, and this is very positive. As well as we do see a significant improvement of the margin. The margin went up 400 bps. It is quite an impressive result. We can definitely say what we have anticipated during previous conference call that basically compared to our expectation, we are, let's say, 9 month, the original expectation of the investment, we are 9 months later. But now we are deploying exactly as we expected this growth. Also, Q4 is we forecast very positive Q4 in order to end up the results according to our expectations. Business Innovation, I can understand that looking from outside is something that need explanations on this, but we know what we have done last year. Last year, Q4 was very strong. The level of portfolio we have now is encouraging. And therefore, we do expect to recover quite significant in terms of profitability during Q4. Obviously, in this area, we have 2 trends that -- all trends was basically already expected. We were already planning a reduction of rates that is obviously, occurring accordingly to the budget law, but we are reacting with other businesses. Obviously, we were expecting a reduction in temporary export management solution, even though starting from July, the level of incoming orders of this area is improving, so we do expect a quite positive Q4. Very positive information is here that the investment we have done in digital innovation, we acquisition of Enhancer Planet are perfectly aligned with our internal budgets, and so is perfectly aligned with the investment case we developed at the time of the acquisition. Obviously, the decrease of the profitability compared to the flat revenue we recorded is mainly driven by the increase of labor cost, but we do expect to significantly compensate this situation in Q4, where most of the revenue will come and the marginal profitability will be much higher in Q4. Now, I leave it to Josef for final consideration and guidance, but we have in place all the action to work through the result we expect and the guidance we are sharing.

Okay, Oddone, thank you. So, just to wrap it up, I'm on Page 20. On Page 20, I would like to reiterate what the Board of Directors has confirmed, which is also the guidance. The guidance in terms of 2023 versus 2022 on a reported base sees revenue growing anywhere between 11% and 15%, EBITDA adjusted growing in the range of 8% to 12%, net financial position over adjusted EBITDA at 0.7x, 0.8x. I would like to reconcile this number for the market in order for everyone to be online. We had come out with a guidance in March of cash positive, obviously not including the acquisitions that we have completed throughout the 9-years. And there's another moving part, which you see here on the note, which is also the lower proceeds due to the postponement by management of the exercise of mature stock options. So, these 2 items, which are obviously the ones that are moving, bring the NFP over adjusted EBITDA to 0.7x, 0.8x, just to flatten any doubts and iron anything out in terms of that. Oddone, do you want to?

Maybe on this point to make, Josef was very clear here. I want to make, going back into numbers. So, we were planning cash positive. Here we are planning 0.7x, 0.8x. If we estimate an EBITDA north, obviously, of some millions north of EUR 100 billion, it means that we are talking about EUR 70 million, EUR 75 million debt, EUR 44 million came from Ascertia, EUR 25 million came from the Defence Tech. We added the extra investment in the software of CRIF and, the not exercise of the Stock Options. So, basically, this accounts for more than EUR 75 million. So, this is how this is explained. Obviously, next year, we will have the full deployment of Ascertia that definitely will help in delivering results.

So, that wraps it up. I would open the Q&A for any questions that you might have. Operator?

[Operator Instructions] The first question is from Aleksandra Arsova of Equita.

A couple of questions from my end. The first one, just a clarification on business innovation. So, you mentioned that you expect a significant recovery in the fourth quarter. Just to get it clear, since we are already in the mid of the fourth quarter, you're actually already seeing this improvement. So, we should expect a significant positive growth in EBITDA in the fourth quarter for business innovation. So, this is the first one. And the second one is just an update on your partnership with Defence Tech. And if you see the probability of exercising your call option to maybe be increasing in the first half of next year?

Definitely, just to give you a little bit of more color on the question of business innovation. I think it's already clear to everybody that Q4 is the driving quarter of the profitability of business innovation because it's - the Finanza Agevolata Automatica as a business itself work in the way that our customers has to complete their investments and put them up and running before year end in order to have the opportunity to cash the grant when they are going to file the tax declaration. So, this is the natural way why these results are improving in Q4. So, this is a rush in Q4 where our clients are rushing to complete their investment and we got the right to build our services to them when their investment is up and running. So, it's a mutual benefit of our clients to complete the activity by the end of the year so they can cash their grant during the following year. So, having tried to clarify why we are stretched over the year end, we have to consider that compared to previous year, the reduction of rates is impacting part of the activity and in some way, some clients reduce their, willing to run this investment. Now, approaching Q3, some of them came back to us and they are re-evaluating this opportunity. So, we are running, we are in a rush, to try to complete with them this investment. Indication from the revenue of month of October is positive compared to previous year. So, and honestly, you have to consider now that already Finanza Agevolata Automatica has a very high profitability because we have to remember that then when warrant was basically only in Finanza Agevolata Automatica, the EBITDA was in the range of 50%. Now, we have to consider basically that you are recording a lot of revenue while the cost, because we are basically cost of people, will be only 1/4. So, the profitability of Q4 internal EBITDA of this business will be much higher. So, we do expect to convert in EBITDA more than 60% of the revenue we generate. So, we do expect a significant. Our Board of Directors today review all the information from the business management and therefore, the Board and all us, we are aligned to confirm the guidance. As we move to Defence Tech, obviously, after the approval of the balance sheet of '23, our Board of Directors will convene in order to analyze and go and taking the decision of whether or not to exercise the code. Obviously, we are working with Defence Tech. We deem the clear limitations we have as we are talking about the 2 listed companies. But, we can say that already some, let's say, commercial cooperation between the 2 companies is helping and is definitely a positive signal indicator. We will work again together within, all the limitations in order to better understand each other and explore all the opportunity of synergy, but I would say it's not going to be a business of cost synergy, but will be an opportunity of development, cross-selling, and developing, and exchange capabilities from the technical standpoint. So far, I have to tell you that I do see a positive indicator and as of today, no one negative indicator. But, again, at the end of the day, it will be the Board that will convene after the approval of the balance sheet to analyze the situation and taking a decision.

The next question is from Russell Pointon of Edison.

A couple of questions, if that's okay. First of all, I'm just trying to square a couple of the comments off. You're confirming overall guidance for the year, but, I mean, in your comments, you state that Digital Trust is, you know, expected to continue growing as above the original guidance. So, and does that mean that actually you're going to get to the overall group guidance by different means? I guess, what I'm trying to get to, is business information going to be weaker than you originally anticipated at the start of the year? The second question is, it is on the Digital Trust, you know, it is performing in their 12th, which is a couple of percentage points above your, the 10% you spoke about at the start of the year. So, could you just give some indication of what is driving that being so much better than you anticipated at the start of the year? And my third question is, there hasn't been much activity on the share buybacks in Q3. Just be interested in your thoughts on that, given where the share price is. And similarly on M&A, just be interested in your thoughts there. Is the balance sheet looking, is going to be in good position by the end of the year? Is it more caution on your side with respect to the outlooks, valuations of the companies in the sector, or is there resistance on the part of the companies you're looking at?

Russell, Oddone here. If I have well understood your question, Digital Trust is performing slight above our expectation. Honestly, growing very close to 15% in terms of revenue is above our expectations. It's above our budget. And at this level, as anticipated, the level, the profitability, the EBITDA adjusted is growing much faster. You are telling me why this? Definitely, I would say that our products continue to perform very well. Last year, we have to remember that inflation in the beginning of the year was quite a potential significant issue. So we put in place in the early part of the year the opportunity to improve pricing, especially on the OTS when possible, and we do that. And this is a driving result. Inflation now is slightly lower than our expectation, and we were able to manage it on the cost side, also negotiating very well with our supplier. And I would say, we were able to continue to develop a digital transformation management solution with some large customers. So the combination of slightly better performance on different items drove us to this. There is no any one-off positive thing. There is no any magic touch from the management. They are hard workers. For example, they had slightly above CapEx than expected because they decided to improve the operation to be more and more focused on the core business. They are outsourcing all the infrastructure management. So we went into an agreement that was also public with WIT. And so this is undergoing, is going to be complete soon. This will allow even more and more focus on product solutions development and client service while we are moving to third-party management of the very large and complex infrastructure. So I would say this growth, as you can see, is steady. This growth is happening quarter-by-quarter. We don't have the significant up and downs compared to the previous year. It means that the company and the business unit, and I'm talking especially of InfoCert and Visura, are very solid, are very well managed. They have a strong management. They put in place operational targets of improvement, and they are able to deliver. So this was the first question. Josef, I'll be on the second one.

B and M&A. Yes. B, buyback, and M&A. Yes. So in terms of, Russell, in terms of buyback, obviously, we know where the share is. There's not much more that we can comment on it, right? And when it comes down to making strategic decision, it is a decision of the Board. We are evaluating all the options. I guess it's just more of a wait-and-see type of scenario here. In terms of the M&A, again, we would love to give you so much more detail, but it takes the time that it takes, right? And when you start evaluating assets, we are constantly evaluating assets and all the different business units. And therefore, when the times are ready, we can then obviously disclose.

If I can just add, although we just invested in the minority part of Defence Tech, we have a call for going to majority. And this is going to be once, when it's completed, a major investment, because we are talking about EUR 125 million. So for cybersecurity, the focus and the capital allocation as of now is this. For Digital Trust, we completed in July the acquisition of Ascertia, putting a foot into not only the U.K. market, but having, a knob of development in Pakistan, as well as presence in Middle East Africa. Very important is, as already mentioned, that Ascertia is a solution for on-premises solution. And this, combined with the capabilities of InfoCert, has led to an important contract. We are going to, that we signed, but we cannot yet disclose, but an important contract we got internationally as a combination between capabilities of Ascertia with capabilities of InfoCert. We have done this. Obviously, in Digital Trust, we are very open to analyze any opportunity that comes. But, we are not in a hurry. We have set the rope. We just acquired Ascertia. We need to find the right deal to be done. And we are interested in deals that are meant for something that help us to bring really a significant improvement. We are, our eyes are very open, and we are looking at potential opportunity when something will come, obviously, will come to the market. Same thing is on business innovation. We are progressing with, the acquisition we have done, and we are looking very actively in the European markets. We are evaluating some opportunities, and, we are confident that this opportunity could, one of these opportunities could come to the end. If you ask me when, it is M&A, but we are working very actively. Financially wise, we are very -- we are in a very healthy situation, and so we are looking around the market for interesting opportunities.

Yes, maybe to complete that, remember the 2 business units, both BI and Digital Trust, if we look at a pan-European market, they are very diversified, right? I mean, the market is extremely fragmented, and therefore, any further consolidation is probably welcomed. I'll leave it there because we can't really comment more.

Okay. Josef, Oddone, just go back to that first question. My main question was, if you are confirming the guidance for the year, but Digital Trust is better, does that imply that business information is not going to do the revenue that you expected at the start here? Because when I read the financial report, cybersecurity and Digital Trust, you do kind of refer, you do talk about the great rates and the great rates for the next few years, but you don't do that in the section for business innovation.

Russell, you have seen that Digital Trust is growing, like we said, slightly above our expectations. So, when we talk about a business unit that could do, let's put EUR 15 million slightly above, we are talking EUR 1 million, EUR 2 million, EUR 3 million, I don't know. Obviously, this is what we are growing 15% in terms of EBITDA, it would be not significantly different at the end. So, if we had the guidance, it would be 1 or 2 point less, we are talking in absolute value, EUR 1 million or EUR 2 million. This is what is going to happen. In the same way, it's not going to change the picture of business innovation, if instead of a gain of 50, it's going to deliver 48. What is going to change? I have to tell you that we are very glad that the improvement of the slightly below performance are in a very, very limited variance. But, when we started the year, the situation was also, from the macroeconomic standpoint, less negative, also the GDP was expected to be slightly better. So, we are very, let's say, happy that in a context like this, we are still confirming to be within the range that we share with the market at the beginning of the year. Obviously, as in any company, as in any business, you may have something that is performing slightly better, something that could perform slightly below our expectation. But there is no major difference everywhere. And on top of this, , we share with the market a strong guidance in terms of increase of cybersecurity. And after 9 months, we are growing 66% on small numbers. It's very clear, because numbers are there in small numbers, but still is on track with expectation. If we grow like this, the growth will be between 35% and 40% at the year-end. That, I would say, is going to be a huge number. So, some adjustments may come, orders can come by the year-end, some revenue could come later or before. It's not changing the picture. The next, after 9 months, is continue to convert and to generate significant cash. Our major pillars are there. We are experiencing a delay in the business innovation, but again, the quarter that is making the difference is Q4. Q4 is there. As I answered to your colleagues a few minutes ago, we have encouraging information. But again, I will tell you, if Tinexta will deliver EUR 1 million more or EUR 1 million less over EBITDA, honestly, it's not making a major difference. What is making difference is our capability to continue -- continuously, the leveraging, continuously to increase double digits in the 2 markets that are growing double digits. And we are performing much better both in Digital Trust and in cybersecurity compared to the market. We continue to leverage, we continue to invest, we continue to deliver aligned with our expectations.

And, just to wrap it up, as a reminder, all this growth is purely organic. We always need to remind the market that this stuff is all purely organic. Any further questions?

The next question is from Isacco Brambilla of Mediobanca.

Just a couple of quick questions from my side. First one is on Digital Trust. With first half results, you provided also a bit more of granularity in terms of growth pace for off-the-shelf and DPM. Wondering if you can give us the same data on a 9-month basis since it looks like business accelerated in the third quarter? Second question is on M&A. You already elaborated a lot on this. Just a follow-up, we saw some business being completed recently in the Digital Trust space, apparently also in regions which were of interest for you. Is there a gap on your side in terms of multiple you are willing to pay, and so you are getting out of the transactions because of valuation for the time being?

Talking about Digital Trust, like I said, OTS is performing very well, but also DPM, we were able to collect quite significant contracts also in this area. I would say that, we are not honestly in a pure consumer market. We do see -- we look at our business at least on an annual basis. In one quarter, we may have slightly better in the OTS, but then if a large contract comes in the following quarter, it rebalances. Both parties are growing very well, and in DPM, we have to remind that each contract we get, we get some one-off opportunity in DPM in terms of revenue, but it starts a recurring revenue there. Again, we have to look at the whole picture. In any case, both areas are growing very well, and as I mentioned before, is increasing also, let's say, the DPM at international level. We are selling starting from a small number also solutions and products on a DPM path to some clients around Europe. This is also a very, very interesting indicator because going to sell a DPM solution moving from Italy is going to be quite different. Obviously, we are talking about the countries where we do not have a company there, but this is very positive. The last question was on the M&A. Yes. Again, we are interested in looking at targets where we can really grow in that country the opportunity to develop our solutions because if not, it's like acquiring just an asset in the Digital Trust. Our strategy is in each country to acquire what do we have, and this allows us to be immediately up and running to have the right authorization and certification, but then the asset has to be the right platform to allow us to develop our solutions. So I think that with these explanations, you may understand why sometimes some assets that could be of our interest has not been. On the other hand, on the multiples, the world around us has changed, and therefore, if sometimes multiples above what we -- more than multiples, I'm looking at the DCF. If the DCF is not allowing us to run an investment, we don't do it. In our DCF, we put also synergies, opportunity of selling our solution, and so on. So, this is something that should help to provide you the picture of some of our decisions.

Oddone, very clear. One quick follow-up on the first question. So, over the past days, the announcement of the agreement for InfoCert with Stellantis for GoSign, could you just remind us if Stellantis is now a brand-new client for Tinexta or if it was already in your customer need?

Isacco, as a reminder, InfoCert is a leader in all the major verticals. We're talking about the banking. We're talking about telcos, utilities, and above all, the automotive. So, we already have extensive, I would say, connections with Stellantis, the group, and other major brands. But I think that the key takeaway from the contract that you heard, which includes over 10,000 dealers around Europe, is that our technology is extremely at reach. And therefore, on one side, you have the flexibility of the solutions, on the other side, you have the Digital Trust. We are the largest certification authority in Europe, and a big group that selects this type of company like InfoCert means that they really want the highest standards when it comes down to security and trust. So, based on that, this is another confirmation, obviously, that InfoCert is being chosen constantly from major groups, medium groups, or small groups because of the exceptional offer that we have.

Very important to understand that looking at the business of InfoCert, one contract is not making the difference next quarter or the next 2 quarters, because you may have one offer, maybe one year we got with Stellantis, the year before we got with a public body, with the major Italian groups, and so on. But what is going to be important? This is the reason why we have a steady growth well above double-digits, is that if things will move properly, this will be further recurring revenue. And so, this will help us to continue to keep a steady growth. So, this business is not the one-off, but it's the install base we have that is generating revenue quarter-after-quarter, providing us the opportunity to invest more in improving our -- improving our solution and to allow us to create more and more a gap between our solution and the solution of our competitors.

The next question is from Chandra Sriraman of Stifel.

Just a couple from my side. Firstly, you've had the cybersecurity business for a while now. It's doing quite well. Can you talk about the cross-selling that you have managed to achieve here in this business? Are you seeing some significant improvement in cross-selling across Digital Trust and cybersecurity? That's #1. And #2 is in terms of Digital Trust, are you seeing -- you mentioned that not a single contract has made a difference. Are you seeing some systemic change in terms of your ability to gain market share in this business off late in the last few quarters? Anything to highlight there would be super helpful. And lastly, in terms of just a follow-up on the digital side of things, the business is now becoming a meaningful contributor. It's now 66% of EBITDA first 9 months. How large can this get? How do you see this business in the medium term?

Sorry, the line was not very clear, so I tried to summarize with Josef.

Yes, so the first question, Chandra, was about cybersecurity cross-selling between Digital Trust and cyber, right? The second was about if you can give us some color on Digital Trust market share gains. I think that was pretty much the questions, right? Am I missing anything, Chandra?

Yes, there's a last one, which is in your medium-term blunt, how large do you -- Can you hear me? Hello?

Yes, in the medium-term, where can Digital Trust go, right? That was the question, right?

Yes, exactly. Yes, yes.

As we announced last year, no, early this year, I do not remember exactly, basically InfoCert and Yoroi went through a joint development of a product, means that in Italy, we have the electronic certified email, and this kind of email became not only certified in terms of trust, but became also cybersecured. So, it means basically that we are provided, that is able not only to certify the sender and the receivers in both ways, but also to certify that the attached document, documentation, has moved from one side to the other in a total cybersecure way. This is what we brought to the market as unique proposition. And yesterday, we have our sales convention, and this was shared that definitely the results of this cooperation and cross-selling went very well. Obviously, now every time one of our companies is delivering projects -- between to our customer, if we are talking about cybersecure solution, the solutions from cybersecurity are the solution that Digital Trust is bringing to the customer. On top of this, I have to tell you that within the growth of the cybersecurity is happening exactly what we were expecting when we acquired Corvallis, Yoroi and Swascan. Yoroi and Swascan are players very well recognized for vertical capability on cybersecurity, while Corvallis has a strong long-term relationship in providing IT services to large corporate clients like Bank and Tesla, like Unicredit, like Unipol, and whatever. Now, we are seeing more and more contracts within this large customer cybersecurity, and this is exactly what we do expect. And this is the reason why we were able to grow within cybersecurity in a significant way.

All right. So, I'll take the other 2 questions, Chandra. So, market share, I understand your concern about the market share, right? But the best way we've always represented that is also been reported in our prior Capital Markets Day. I'm not talking about this year, I'm talking about the prior year. What we do is in the best way, to analyze it is on a revenue base, right? So, I still remember that slide where we were showing both at an Italian level as well as at a European level where we were, and obviously we ranked #1 in terms of Digital Trust. And when we analyzed those revenues, we're taking in consideration the digital transformation market, right? So, in other words, I agree with you. We are now reaching a sizable amount of revenue. If I look at the 9 months now, Digital Trust is now north of EUR 130 million. So, you can see where we plan to land this year, right? I think the most important takeaway here is the fact that we, and we mentioned this, prior, during the call, that it's been consistent, 10, 15 quarters of growth. I mean, we've had the opportunity of growing mid-teens. And, to kind of answer your third question, which was -- where do you plan to see, where do you see this business? We definitely see this business growing on an organic base. That means without any acquisitions in the mid-teens, right? That was the number that we gave out during the capital markets day in March. And, you know, there's no reason why this division shouldn't be growing in that direction. On top of that, obviously, you can add all the M&A you want, granted that the M&A is obviously of our interest, right? Because we want the M&A to be accretive, not just from a financial standpoint, which is a given for us, right? Cash flow is our fixation, but also from a, strategy, service, and product standpoint, right? So, just to give you a quick answer, the overall organic growth is something that, is absolutely to our reach when it comes down. And when I'm saying organic growth, I'm talking about mid-teens in terms of EBITDA, and that's where, you know, we projected the growth. Again, we'll see where the year ends up, but I think that's the best type of answer that we can provide right now.

The next question is a follow-up from Aleksandra Arsova of Equita. Please go ahead.

Just a very quick follow-up, 2 questions. From the visibility we have today, I know it's a little bit early, but how you see 2024, also considering the indications you gave during your business plan at the beginning of this year, so you are still confident in what you said some months ago? And the second one, so previously you mentioned that if you, of course, exercise the call on Defence Tech, you will cash out an additional EUR 125 million. So, during the match, you will be close to 2x net EBITDA after the deal, if the deal is completed, of course. So, you will prefer to maybe wait and leverage a little bit before doing additional M&A, or do you believe that this is not a threshold, that 2x net EBITDA, and so which is your target leverage?

Aleksandra, Oddone here, talking about the leverage, historically, our group always thought that a 2.5x EBITDA could have been the right, the maximum level to put the leverage. So, obviously, if we are going to run a Defence Tech, we'll be, and the additional cash out is going to be not EUR 125 million, but early estimate is talking about EUR 100 million, but any case. So, still, we are within our parameters, because on top of this year forecast, you have to include a share, and then you have to include the Defence Tech. Having said that, this is, I do, in terms of your correct question, on potential limitation on M&A, I would say no, because I think that, obviously, we will evaluate if the 2.5x could be evaluated, if we could go slightly above. Any case, we have to remember that already 1.5 years ago, there was a resolution from the shareholder meeting for which, the Board of Director is empowered to call for a potential share capital increase up to EUR 100 million. So, this is in the power of the Board. So, I have to tell you that if a major opportunity will come, the Board of Directors will look carefully to all the options that we could put on the table. So, I think that, I strongly believe that we can have full support from the bank to go also above, but then the board will decide what to do. So, here we are, and I do not see the Board having the view to limit our M&A policy.

As a reminder, we went over this during the Capital Markets Day, the way we carry out M&A, some of the major requirements, according to Tinexta, are the fact that these assets need to generate cash. So, as a prerequisite, this means that when we buy, we may reach a momentary peak in terms of leverage ratio, which would then fall down in the following 1 year and 1.5 year or so. On the second question, Chandra, on 2024, we will reconvene, and once we have, you know, a better picture of the end of '23 and the assumptions for '24, we will make it clear to the market.

Also, you know, the perimeters change because of the Ascertia, so we will do as usual.

The next question is from Andrea Bonfa of Banca Akros.

Very quickly, most of my questions have already been answered, so I got, once again, I would like to have a clarification.

I hope so. I hope so. I'm joking. Please, please, go ahead.

Now, again, on the higher net debt for the year, and you left us with 0.2, 0.3 at the end of the semester, there is definitely the acquisition of Defence Tech, Defence Tech, which is adding EUR 25 million, but there is another shortfall of EUR 20 million, EUR 25 million, which I don't get because the Treasury shares were already included in the previous guidance. So, is any item particularly worth mentioning, or where is the delta?

Yes. Probably, we were not connected at that time. We have -- we said to the market cash positive. Let's assume it was EUR 5 million, EUR 10 million, whatever. Now, if we are going to be in the range of 0.7x, 0.8x, we are talking about roughly EUR 75 million to make it around numbers. Now, 44 is a share, let's say 45. Plus 25 is Defence Tech, and so we land to 70. Then we have EUR 10 million investment in CRIF software, and then we have less cash in of about EUR 15 million from not exercising the stock options from the management.

Mr. Mastragostino, there are no more questions registered at this time.

Thank you very much. We appreciate your time. We'll reconnect for the fiscal year '23, which will be announced next year.

Thank you, everybody, for this call and your attention and the questions. Obviously, we are available.

Anytime.

Anytime.

Bye.

Bye. Have a nice weekend.