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 31st December 2025 presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Josef Mastragostino, Chief Investor Relations Officer. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and good morning to the folks connected from overseas. This is Tinexta's fiscal year '25 results. Here with me today are, Oddone Pozzi, Group Chief Financial Officer. As a reminder, all documents related to the 2025 financial results are available for download on the Investor Relations section of our company website, and you can connect to this call and to all other documents via QR code at the end of this presentation. Let's now turn to Page 3. For the purpose of this call, I will kick it off with the executive summary and business highlights. Oddone will review the fiscal year '25 financial results. I then will follow up with the BU outlook, and Oddone will wrap it up with 2026-2028 business plan targets. At the end of the call, we will be available for a Q&A session upon completion of this call. An audio recording will be available on our company website. Let us turn to Page 5 of the presentation, which recaps the brief history and timeline of the MTO or mandatory takeover promoted by private equity funds, Advent and Nextalia on Tinexta's shares. In August, as you all know, Tecno Holding and the 2 private equity funds signed binding agreements for the transfer of a controlling stake equal to 38.74% of the share capital, subject to the 2 conditions precedents, namely Antitrust as well as the Golden Power, which respectively came in, in October and December of the prior year. The latter, which was granted on December 24 with the issuance of a Prime Ministerial Decree requiring, among other conditions for the disposal of the stake in the Tinexta Defence in favor of an entity deemed by the government capable of safeguarding the essential interest of national security and defense with reference to Defence Group. From the closing date of December 30, 2025, all information flows from Tinexta Defence to the parent company have been segregated and the stake has been transferred to a blind trust established in early January. At the same time, the closing of the transactions triggering the launch of a mandatory takeover at a price of EUR 15 cum dividend per share as well as the renewal of the Board of Directors, which was appointed by the shareholders' meeting back in December of '25. At this point, maybe some of the most important elements for your information, they're all highlighted on this slide, and they're all available on the website. The offer document has been approved by CONSOB on February 19 with an acceptance period starting on February 23. And just as a reminder, the accepted period will last for 20 trading days and will end on March 20, 2026. Let's turn to Page 6. Before I go over fiscal year 2025 figures, I would like to remind you that in accordance with IFRS, the Defence Group's contribution as of December 31, '25 is classified in the income statement and balance sheet under discontinued operations and assets held for sale. This reclassification is also reflected in fiscal year '24 comparative data, Oddone will give you a more detailed explanation of the deconsolidation process while giving you an in-depth analysis of the financial results for the year. 2025 revenue grew by 4% to EUR 457 million, while EBITDA adjusted landed at EUR 103 million, a 3% decrease. Net profit adjusted from continuing operation came in at EUR 36 million with a 3% decrease, actually, while falling to a negative EUR 58 million on a reported basis, mainly due to some noncurrent impairment, which will be discussed more in that later during the presentation. Free cash flow on an adjusted basis from continuing operation was EUR 70 million, growing 60% versus fiscal year '24. Cash generation was reflected in the decrease in the net debt, which came in at EUR 240 million versus the EUR 322 million recorded in fiscal year '24. Net debt in fiscal year '25 also includes positive effects of Tinexta Defence debt consolidation of around EUR 89 million in accordance with IFRS. Leverage ratio sits at 2.33x at the end of the year. It is important to note that results came in line with the preview already issued on January 22, 2026. Turning to Page 7. Slide 7 shows the growth trends of Tinexta's key indicators over the last decade with revenues growing on a CAGR base to around '14-'25 at around 18%; EBITDA adjusted growing on a CAGR base, again, '14-'25 at over 20%. Turning to Page 8. Results were in line with the preview as we just said. Revenues were EUR 457 million, growing close to 4% and EBITDA adjusted was EUR 103 million or declining around 3% with a margin of 22.6%. The growth shown in Digital Trust was more than offset by slowdowns in cybersecurity and business innovation. EBITDA on a reported basis came in at EUR 90.8 million with a 19.9% margin. EBIT adjusted came in at EUR 63 million, negative -- by EUR 68 million on a reported basis due to impairment of goodwill related to acquisition. Again, Oddone will provide much more color on this later. As mentioned a few slides ago, net profit adjusted from continuing operations came in at EUR 35.5 million, negative EUR 57.9 million on a reported basis. Net profit attributable to discontinued operations was equal to positive EUR 12.1 million. The change in net financial debt to around EUR 240 million is mainly attributable to cash flow generation as well as positive impacts from Put adjustments and as previously mentioned, the deconsolidation of the Defence Group. Free cash flow adjusted from continuing operation was EUR 70.4 million versus the EUR 43.7 million recorded in the prior year due to lower CapEx and cash taxes paid during the period. On a divisional basis, on the center part of the slide, Digital Trust revenues grew by 7% with EBITDA adjusted coming in at 5.6% and a margin of 31.2%, extremely healthy margin. mostly in line with the prior year. Cybersecurity revenues fell by 3% with EBITDA adjusted decreasing by 4% and EBITDA margin at 13.9%. In terms of BI, revenues grew by 3% with a significant decrease both in EBITDA adjusted, minus 15% as well as marginality, which came in at 24%. Finally, I would like to provide a brief overview of some of the key updates on the bottom. As we said, maybe it's worthy of mention the fact that the Board unanimously approved the issuer statements regarding the MTO and deemed also on a unanimous basis, the offered price fair from a financial standpoint. I will now leave the floor to Oddone to provide more details on fiscal year '25 results.

Hello. Good afternoon, everybody. And as already mentioned by Josef, let's move now to Page 10 before entering into the analysis of '25 results. As mentioned by Josef, following the DPCM of December 24, we went through a different accounting for Tinexta Defence following the IFRS 10. So basically, the company has been deconsolidated since day 1. It also has been restated the financial figures of the year to -- at the end of '24. Basically, at the end of '24, you will see as an asset available for sale, while at the end of '25, these assets available for sale has been accounted at short-term cash. So this means that it's an asset held for sale, but following the prescription of the DPCM that was stating that the company would put on sale immediately in the short term after the move out from the control of Tinexta. So basically, the current accounting is reporting this within the net financial position as a positive asset. When the company will be definitely sold, we will cash in, we will move from credit financial receivable short term to directly to cash. So this is very important. So everything has been restated. All figures are really comparable. So the new perimeter as already shared with the market is the full perimeter without Defence Tech. As already mentioned by Josef, the year ended with revenue growing around 3%, so below our expectation, but still positive on an organic basis, while the EBITDA went down almost 3% and also the adjusted EBITDA and also net profit before adjustment has declined compared to previous year. Overall, the EBITDA adjusted closed at EUR 103 million with an EBITDA -- adjusted EBITDA margin at 22.6% reducing compared to previous year. And the net profit reported is negative by EUR 45.8 million. I would say EUR 70 million of this driven by impairment related adjusted on the put and earnout position. Very positive has been the free cash flow during the year, the extreme discipline in working capital management as well as, as already anticipated to the market of a much more rigorous management of the CapEx allow the company to deliver -- without the contribution of Defence Tech, more than EUR 70 million from continued operation of adjusted free cash flow in very important growth compared to EUR 44 million of the previous year. What happens to the P&L? We can walk through at Page 12. Basically, as I stated, the revenues went up mainly, I would say, in 2 of the 3 divisions, with a pace lower than one expected, but still growing, while we recorded a decline in revenue in Cybersecurity. In terms of costs, overall, the cost of services and labor cost was handled more online, aligned with previous year, also with an improvement in terms of cost on the revenue, but this occurred mainly in commercial and G&A cost, while the third-party cost related to delivery of the business has increased quite significantly as well as the increase of cost of salaries and personnel costs went up quite significantly at 9%, and this was occurred especially in Digital Trust and in Business Innovation activity. And this has been mainly -- it has been mainly the driver of the decline in terms of EBITDA that impacted the results. Other nonrecurring costs were aligned with previous year, while in the depreciation, amortization and impairment, you have here a significant increase. As during the year, already in June and September, some impairment has been recorded following the weak development of activities in basically 3 companies that are all foreign companies like ABF primarily, and then CertEurope and Ascertia in Digital Trust. During Q4, we had a shortfall in success rate of activity of ABF that led us at the end of the day to the decision to develop a much more prudent plan compared to the previous one as the continuous decline of the success rate driven by the very difficult financial situation in France, where the contribution to innovation to the companies has been significantly reduced has driven to, like I said, to deliver a much more prudent plan, and this obviously has impacted the fair value of the company. This is the reason why we had to run a full impairment of around EUR 70 million in ABF. Further, let's say, impairment occurred in Ascertia, also here driven by a weak Q4 that again led us to produce a much more prudent plan. We also saw a minor adjustment also on fair value. The company is still increasing the performance compared to previous year. But again, also here, the level of the plan that has been developed drove to a minor -- to an adjustment of EUR 6 million. On the other side, we had EUR 23 million of positive impact in financial charges -- between financial charges and financial income because basically, while we were reducing the level of the fair value of the company, also the level of the put and earnout has been reduced by EUR 23 million. So overall, we can say that all the adjustment to the balance sheet of the group has recorded -- has driven an impact of EUR 70 million, and this is exactly different from the positive of EUR 35 million compared to the negative of EUR 40 million. These are the main drivers of the results. You may see also that the net profit of discontinued operation of Defence Tech has been recorded here. This is the combination of 2 different things as stated in our Relazioni. And so basically, EUR 3.6 billion is the result of the current -- the 25 year of Defence Tech, while the remaining portion is a recovery of the previous devaluation that we run when we were during the public offer. So this is the results of the company. And so in the following page, Page 13, you have here basically the adjusted figures taking out all the nonrecurring operation. And I would say that the level of EBITDA has been already explained. The level of amortization of other intangible assets from consolidation means from PPA has been aligned with the previous year. I also went through the commentary of the EUR 93 million of impairment as well as 2.1% combined to the 21.4% that is the benefit that we get on puts and earnouts. If we move to Page 14, you may see here in one single page, basically the trend that I already anticipated to you before working into much more details. Digital Trust has a growth in the range of 7% in terms of revenue, only 6% in terms of margin. Cybersecurity went down 3% of revenue, being able to keep the decline of the EBITDA at 4%, while Business Innovation had a very, very weak year, mainly driven by cost management, cost and personnel cost management. Digital Trust, overall, if we move to Page 15, Digital Trust mainly delivered a revenue of 7% growth that is slightly below our original expectation. But overall, we may say that this has been mainly driven by the performance -- not positive performance from Ascertia. If we take out Ascertia, we may say that overall, the company was able to grow in terms of revenue and profitability compared to the previous year, not at all far from the expectation. Very important is also looking at our business to the third bullet, in line with our expectation, as previously announced, the business unit dropped materially the CapEx that were extraordinarily higher in 2024 to less than EUR 14 million. So like I said, we have more or less the same marginality. EBITDA went up around 6%, mainly driven by the performance of Ascertia and that we delivered during the year. In Cybersecurity, the performance has been not aligned at all with the expectations. The company was not able to keep the level of revenue of the previous year. Especially we were facing in security solution area, a lack of capability to penetrate the customer and the market and also we have some lack of profitability in some area of the activity. We were able more or less to keep the level of revenue in the digital portion, mainly helped by some sales in proprietary product, basically the [ email ] that is one of the most specific part of this business. But at the end, in combination of the 2, the company was not able to achieve the revenue targets and still not even achieve the same level of revenue of the previous year. The company worked quite a lot on costs, especially on labor cost that went down compared to the previous year, a couple of million. We are talking about around EUR 45 million of personnel costs. So they went down. So they were also able to recover the natural cost growing of the inflation relating to the personnel cost. But this was not enough to keep the profitability that was missed compared to previous year of around 4%, keeping the same level of EBITDA margin around 14%, but still not achieving what committed at the beginning of the year. In Business Innovation, we talked several times during the year, even last time when we issued the guidance, the management of the group had knew from a few days that a new issued rules for Industry 5.0 could have been -- could have hit significantly the profitability of the company. At that time, we were all in a position to estimate a potential impact up to 3% of the profitability of the group in terms of EBITDA. And unfortunately, this occurred. So basically, here, definitely compared to the last projections, we have been hit by the Industry 5.0 last minute changes -- changing of the rule. But it has been clear that overall, the company was able to deliver a slight increase in terms of revenue. But in terms of cost management, the company again, already missed EUR 3 million, EUR 4 million of revenue profitability in last part of the year without any opportunity to react in such a short term. But obviously, this is the result. In terms of the French market, the situation is difficult. At the end of Q3, the level of the success rate of this kind of business was around 36%. And last year, the Q4 that was extremely positive with 50% of success rate drove the results up to 42% of success rate, enabling the company to deliver a EUR 3 million -- more than EUR 3 million EBITDA. Q4 this year has been dramatically low in terms of responses, answers from the public bodies entitled to issue the contribution to the investors and the success rate dropped to 31% in the Q4 affecting significantly the results of the year. What we are observing there is that basically the positive -- the files that has been accepted by the public bodies went out last year with 36% fee for us that is linked to the level of investment in innovation this year with 21,000 per project. It means that basically, the government -- the public bodies are approving only small contracts, and you can imagine that small contracts have, by definition, a much lower profitability, while the largest contract has been refused during this period. So overall, this combined, so we lost EUR 3 million from ABF and the other EUR 4 million from the other part of the business compared to previous year where Industry 5.0 has definitely impacted the result. In terms of balance sheet, I already explained how we -- has been dropped the net financial position and how much is accounted for the Tinexta Defence Group. So basically, this is already in the positive cash. Nevertheless, the net financial position has been favorably impacted by more than EUR 70 million of free cash flow that is a very important achievement of the company. The company has already distributed EUR 20 million dividends overall during the year. The net invested capital obviously has been declined half of this relating to the write-downs of the goodwill of some companies and the consolidation of the Defence Group that brought the net invested capital below EUR 600 million, while the goodwill now is EUR 370 million. Obviously, we had also an impact also into the shareholder equity. We have a decline of EUR 34 million in the shareholders' equity that is driven by the exercise of the call -- the put, let's put in this way, of our minority shareholder Banca Intesa in Tinexta Innovation that led us to record a loss, the equity of EUR 34 million, but -- and the single balance sheet of Tinexta Innovation Hub by EUR 22 million, but this has been driven. Again, the low performance of Tinexta Innovation Hub has driven a lower valuation of the group. And therefore, we recorded a loss while we accounted for the put of Intesa that is already in the net financial position as at the end of the year. If we move to Page 19, I think already commented on the net financial position. If I go to the free cash flow, I may repeat here that we were able to increase significantly the cash generation of the group, very strong discipline in net working capital management, where we improved significantly also in business innovation on top of other businesses. And we reduced invoice to be issued compared to the previous year. And also, we reduced the CapEx by EUR 11 million. Overall, this led us to this result. I think that all, as already I more or less explained what happened at Page 20, and then I leave the floor again. Thank you.

Thank you, Oddone. I will now go over some key elements regarding the current state of our BU's core market as well as providing some color on the drivers for the future. Slide 22. Let's start with Digital Trust. Digital Trust division is operating in the ever-evolving digital transaction management market with established presence, as you all know, in primary EU countries. Currently, changes in the DTM segments are mainly driven by developing regulations, both at the EU level and national level. Just to mention some examples, EU wallet, e-invoicing requirements as well as the acceleration of new technologies such as artificial intelligence, which also highlights the need for stricter security measures. The push for harmonization on a regulatory level as well as the fragmented competitive environment fosters a growing consolidation trend in the market, leading bigger qualified players such as Tinexta Infocert, to acquire potentially small local players. The EU digital trust market is expected to grow on a CAGR base '24-'28 expected of 13.7% with introduction of new EU regulation fostering a growing interest in identity management and identity wallet, which respectively, will grow 15% and 57%, again, CAGR '24-'28 expected, shifting from a previous focus of e-signatures. In this context, e-invoicing remains a complementary market, also given the push from EU regulation towards mandatory adoption. We all remind the market that the deadline is by 2028, and the CAGR is again very interesting, '24-'28 expected of around 16%. One of the main challenges for players in this space is represented by the asymmetry in the digitalization among EU countries, which all have different levels of digitalization. The matrix on the right-hand side of the slide clearly encapsulates this concept, highlighting the potential for penetration in markets that showcase low digital maturity and higher potential market size, such as Germany and the U.K., just to mention a few. In the next few years, DTM market expansion is well -- is going to be led by the aforementioned technology and regulatory standardization as well as by stronger operational requirements and evolving regulation unlocking new markets with big players still needing a degree of customization at a local level in terms of geographies. Tinexta Infocert expertise and presence in high potential markets with varying levels of maturity could be instrumental in creating an optimization product offering, and this could actually represent a strong advantage in the fast-developing DT environment. For Cybersecurity, let's turn to Page 23. In that case, the division mainly operates in the domestic market in this case, providing both security solutions and system integration. The Italian cyber market is expected to grow strongly from the EUR 2.2 billion registered in '24 to around EUR 4-plus-billion in 2030 with CAGRs of around 11%, '24-'30 expected CAGRs that is, supported by more stringent regulatory requirements, in particular, NIS2 and growing risk awareness, leading companies to increase their security budgets in a context where global cyber-attacks are on the rise. I mean, the news of these last few days make this a very strong point. In this scenario, Tinexta Cyber acts as a very specialized player, mainly focusing on finance segment. navigating a fragmented yet competitive market environment. On the other hand, the system integration market instead is worth approximately EUR 6.4 billion, and that instead is expected to remain stable in the same course of time between '24 and 2030. The market is characterized again by a very fragmented and competitive landscape, and this will represent, obviously, some opportunities in the near future. Let's now turn to Page 24 and go over some key elements of business innovation. Oddone provided a very, I would say, thorough analysis of what the year represented, but let's give some context here. Tinexta Innovation Hub is positioned regardless of the performance of this year as the leading Italian player in subsidized finance, for example, and that is based on revenue. In particular, aside from subsidized finance, the company provides also advisory on European financing, sustainability and energy, corporate finance, innovation, internationalization and digital marketing. Looking at the Finance and Grants or F&G segments in Tinexta Innovation Hub market, we can see the normalization of tax incentives and the overall reduction in the number of Subsidized Finance programs at a EU level in the next couple of years. That is for sure. In Italy, the reduction in available funds, which we witnessed this year, combined with the decrease in deductible rates from the 40%/50% in '22 to the 10%/20% in '25 and the procedural complexity lowered the attractiveness of Subsidized Finance programs such as Industry 4.0 and 5.0. The evolving form of the 5.0 or the [Foreign Language] could be though a driver for revenue in the next couple of years, already starting in '26. So definitely a nice look at that. At the EU level, France continues to be unfortunately very penalized by political and economic instability, hindering public budgets and introducing stringent requirements for approval. Spain, on the other side, sees the expected reduction in RPP for the next few years. In 2024, we decided also to introduce the advisory business line to expand the offering through a complementary product portfolio by diversifying revenue sources, implementing cross-selling and leveraging twin transition. Advisory -- Serviceable Addressable Market, also known as SAM in Italy is expected to grow 9%, and that includes ESG export, temporary expert services and digital marketing. Let me now turn it to Oddone for the 2026 guidance and '26-'28 business plan targets. Oddone?

Okay. Thank you, Josef. After the view from Josef on markets and activities, let's try to look at the overall picture of how we are shaping our plan for the group and from the different business unit for the next years. If we look at '26, I will go first by business unit. So overall, I may say that this year, we have taken a much more prudent approach in terms of revenue, but mainly this also in terms of cost. So we were putting together a plan with much more adherence to the previous performance in terms of revenue. So we need to stay aligned with the performance that the group has been able to deliver over the last couple of years in terms of revenue. And we decided, therefore, to adjust our cost basis in order to allow an EBITDA growth compared to the fact that this year, the like-for-like result has been lower than previous year. So for Digital Trust, the growth expected in '26 is in the range in terms of revenue of 4%, 6%. And we do expect to leverage on this, trying to have much more focus and discipline on the cost basis. And so therefore, we do expect to grow around 7% that is higher than the performance we delivered during -- in terms of growth compared to what we delivered in '25. In terms of Cybersecurity, we do not expect significant recovery of revenues. Definitely, we do expect to recover some revenue in the area of Cybersecurity because the market is there, the opportunity are there. We were not able to catch them as expected during '24. But still, we are working to achieve a growth in that area that could lead us to deliver a growth revenue more or less in the range of 2%, 4%. Obviously, further discipline is expected, and we will continue to reduce cost in this area that especially on third-party as well as a much more disciplined management of personnel cost. This could lead us to increase 15%, 17%. But again, we are talking about a significant percentage, but on a significant cost basis because we are talking about EUR 80 million. So if we recover -- to recover EUR 2 million, it needs to grow 15%. So we are not talking about strong increase in terms of absolute value is more a management of costs here. In terms of Business Innovation, here, the growth is still interesting. We do expect to grow internal revenue 6%, 7%. We do believe that especially being able to grow also in the '25 despite of the negative impact of Industry 5.0 is driving us to think that we could be in a position to grow more than 6% during the year. Obviously, this revenue growth will be fueled mainly by the new regulation on what we call [Foreign Language] that could allow the Finance and Grant business to recover revenue, but especially margins. As you know the rate, what is called [Foreign Language] here is around 40% despite the fact that this is an [Foreign Language] accelerated depreciation that is taken quite a long period. Nevertheless, here, there is an opportunity. Also, there is the opportunity on our [Foreign Language] where the positive performance of the subsidiary warrant funding project has already achieved the fixed part of some project. As soon as the project will be completed, we will achieve, and this is expected during the '26, achieve significant term of revenue and profitability. So I would say that half of this growth should be reasonably secured. Obviously, is projected a partial recovery of in '26 of ABF. And if we combine this with a much more disciplined cost management should allow us to recover the profitability not at the level of '24, but much closer to '24 results than to '25 results. We do expect still a capability of cash generation in the range of 25, if not, even better. And this should lead us to a net financial position -- ratio between net financial position and EBITDA as a group in the range of 3.1%, 3.3%. And at combined level, obviously, the revenues are expected to grow 3%, 4%, while the EBITDA adjusted 7%, 8%. So this is the projections for the '26. If we move to the 3 years plan, again, we do believe to be able to continue our path of growth profitability a quite interesting pace because we are talking about 7%, 9% on a compound average growth rate, driven obviously, with the help of revenues growing in the range of 3%, 5%, but fueled by a very extensive capability to handle third-party cost and personnel cost. Cash generation is expected to continue very solid over the 3 years, capable to land in the range of 2x the EBITDA. Finally, at BU level, as you can see, there is no much more movement in the next 2 years, '27, '28 compared to the previous one. But again, this is overall, so basically, we do see Digital Trust capable to start to grow again at a very interesting part in -- especially in profitability, Cybersecurity to recover and to improve 3 points of profitability, so basically to land in the range of 16%, 17% EBITDA and to bring, like I said, not yet back in absolute value to the results of '24, but still very close to '24 results for the business enough. So this is all, I completed my part 2. And then so I leave to Josef, as I think now we have the Q&A part. Yes, and correct.

If we can, operator, open the Q&A line for any questions, please.

[Operator Instructions] Gentlemen, there are no questions registered at this time. I'll turn the conference back to you for any closing remarks.

Thank you.

Thank you very much, and have a good evening.

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