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

Good afternoon, everyone, and welcome to Tinexta 1H 2026 Financial Results Presentation. Before I hand over to your host today, [Operator Instructions] I now have pleasure handing over to Josef Mastragostino, Chief Investor Relations Officer. Please go ahead, Josef, the floor to you.

Thank you, operator. Good afternoon to all of you that joined Tinexta's first half financial results presentation. Here with me today, the Group Financial Officer, Oddone Pozzi.

Good afternoon, everybody.

As usual, I will go over some highlights and updates. So Oddone then will deep dive into 1H results as well as the business unit dynamics and updates. And then we will be closing with some closing remarks. The last part of the call will be dedicated to Q&A. And as a reminder, all the recording and the necessary documentation such as the press release as well as the presentations are already available on the company website. So let's turn to Page 5, so we can go over some of the key group financial data. Revenues came in at EUR 214 million, pretty much in line with previous year. EBITDA adjusted was EUR 34 million with a small decline of 3% versus the prior year. EBITDA on a reported basis was EUR 28 million. Net profit on an adjusted basis was EUR 2 million, and the net financial position was EUR 343 million versus the EUR 240 million of the fiscal year '25. Very strong, came in, in terms of cash flow results, EUR 52 million, plus 39% versus the prior year and even an LTM number, which we'll discuss later, was very, very strong. Let's please turn to Page 6 of the presentation, so we can go over some of the key highlights. Revenues, as we said, are EUR 214 million, pretty much flat versus the prior year, reflecting growth both in Digital Trust, which grew 3.8% and Business Innovation business units growing 2.9%, which were offset, unfortunately, by Tinexta Cybersecurity's performance, which declined by 17%. EBITDA adjusted was EUR 33 million, dragged down by a significant decrease, both in the Cybersecurity and Business Innovation business lines despite a double-digit growth instead in the Digital Trust business unit. EBITDA on a reported basis was EUR 28 million. The margin was EUR 15.7 million (sic) [ 15.7% ] when we're looking at EBITDA adjusted margin, the reported margin was 13%. EBIT reported instead was negative EUR 41 million. This was related to ABF, but Oddone will go over the impairments in detail. Net profit on an adjusted basis from continuing operations was EUR 2 million, while on a reported basis, it was a negative EUR 43 million. Net debt we discussed and maybe it's worthwhile mentioning that the change in the net financial debt mainly reflects the estimated value of the exercise of the call option on Bregal Milestone, but this is a known fact. Free cash flow from continuing operation, again, was EUR 53 million versus EUR 38 million of prior year. And kudos to, I think, the entire finance department because EUR 85 million of free cash flow on an LTM basis was a great result, specifically in the last 12 months. That was reflecting favorable net working capital dynamics. Lastly, net financial position over LTM EBITDA adjusted was 3.36x. In the center part of the slide, you can see already the KPIs from a business unit perspective, very good top line, I would say, in terms of revenues for Digital Trust, even though it was shy of 4%. EBITDA was much stronger at 13% growth versus prior year. EBITDA margin was at another historical high, 30.2%. Cybersecurity instead was deeply impacted with revenues declining 17% and EBITDA declining 59%. The margin was really mid double -- mid-single digit at 5%. Business unit Business Innovation grew 3%, while EBITDA declined 36% versus the prior year. The bottom part of the slide, instead, we are recapping some of the recent events. As you all have been aware, as of June 10, there was a launch of a voluntary tender offer by Zinc BidCo. And by July 22, the final results of the VTO, again, voluntary tender offer showed an overall 90.34% of the share capital of Tinexta. Relatively to the last couple of days between July 24 to July 29, the offer continued to purchase Tinexta's shares, reaching a total as of July 30 of 90.36%. I think the major takeaway here is that the consideration due to -- for the shares remaining will be determined by CONSOB. So you will obviously be informed by all means. Turning to Page 7. I think most of these numbers have been commented and highlighted. So the revenues were flat. EBITDA declined 3%. And at this point, I will leave it to Oddone turning to Page 9 of the presentation.

Okay. Thank you, Josef, and good afternoon again to everybody. Here, we had the results of overall group by business unit, as you may have seen in the press release, we are delivering now sharing the results of H1, while the results of Q2 has been improving compared to last year with basically same revenues, but increased about 9% of EBITDA following an expected trend from our side. Overall, still the revenue is flat compared to previous year and also on LTM basis, we are basically flat with the end of the year. On the EBITDA, like I said, we recovered a bit despite results of Cybersecurity that unfortunately was definitely much lower than currently we expected, but already some actions have been put in place in order to restore partially the situation by the end of the year. Digital Trust went well in terms of revenues, we have a growth of 4%. But in terms of EBITDA, we are up of 13.4% as we were able to handle the cost that affected negatively the last year in terms of third-party costs and cloud, as we shared with the market here, the company is back to delivering a higher than double-digit result in first half. Cybersecurity is facing a tough H1. The revenue continued to go down basically aligned to the performance of H1, definitely the pressure on the market of system integration is heavily impacting the results of our division, but also in Cybersecurity, despite reasonable profitability in terms of EBITDA margin, still the revenue are weaker than expected, I would say, mostly driven by internal effect. Our capability to drop cost has been there because we left EUR 7 million of revenue, but we dropped only EUR 2.5 million of profitability. We were able to cut quickly some costs, but not enough to restore the situation. Definitely, the aggressive action we have taken over Q2 on cost will start to deliver back in Q3 and Q4, and we do expect to partially recover compared to in H2, even though also for H2, we are not planning a recovery in terms of revenue as the trend in this moment is what we have seen. For Business Innovation, I would say that if we are going to take out the impact of ABF, the results of Business Innovation are finally back to positive. So, let's say, growth despite the number in this -- looking at the numbers, basically, we are growing the revenue, but not in terms of profitability of H1, but I will deep dive later on. In terms of P&L, as you may see already commented in terms of EBITDA, as you can see here, we were able to drop the cost of third-party and services cost. As like I mentioned, in terms of personnel cost, we are slightly going up compared to previous year, but with a trend that is basically declining driven by the action we have put in place. On nonrecurring cost, we are facing couple of million costs related to the public offer. The company has been involved in many, many legal matters as well as fairness opinion for the Board, for the independent Board member. And so this has been a burden of cost and activity for our group over the last 6 months that is carrying some costs. We had also some cost of layoffs here as well as some costs from consultancy in order to speed up cost out program here on the business unit that are facing more difficulties. Depreciation and amortization includes EUR 30.5 million that then net deferred tax liability went down to EUR 31 million related to ABF business. Basically here, the trend in terms of success rate went down to the minimum level ever just before the France entered into a very different dynamics compared to the past where the success rate of the filing was 71% in H1, the success rate at the end was 24%. So definitely, we are reacting in terms of -- again here in terms of cost cutting and not replacement of resources and probably we will accelerate further, but the situation as of today is this. Financial charges, overall, the cost of debt is over [Audio Gap] Just the -- we accounted the put and the call for the minority of Tinexta Innovation Hub and Infocert, but not yet, we had the cash out. So overall, the financial cost is the same. While obviously, last year, we got benefit as financial income that came from the cancellation of put Ascertia in ABF. Overall, the result has been impacted, like I mentioned before, by the depreciation of -- the depreciation from ABF. In nonrecurring results, the nonrecurring impact is quite detailed over here. I would say the main point is related -- the main difference compared to the past is related to ABF. Not, I would say, no major other impact that I have not yet commented like the nonrecurring service cost that we had on the past. Net capital invested decreased compared to the end of the year. Obviously, we benefit as already Josef shared with you. We had a strong organic decrease in net working capital that helped us to deliver a very strong cash generation and despite of the overall results. So it means that we further improve our DSOs down the road. Obviously, we have amortization on top of the, let's say, depreciation of ABF. Net financial position went up as we accounted already in Q1, the potential debt for the payment of the call -- the exercise of the call over the minority of ABF still the process is ongoing following the shareholder agreement and the contract with the minority. We do expect in the following quarters to be completely set up. No other major point on total shareholder equity. Obviously, here, we have 2 impact. Definitely the main impact is related to the decrease by the estimated value of the acquisition of the shares of Bregal in Tinexta Infocert as well as the impact of the loss of the period. If we go on an LTM basis, I would say I have nothing major to share here with you. And while if we jump to Page 14, yes, to Page 14. Like I said before, we had a very strong -- another strong quarter in terms of cash generation, strong improvement over the previous year that was less positive than the past, driven by the Infocert that now is fully recovering. So we add up to EUR 52 million in 1H and LTM basis, we are up to EUR 85 million. That is a very strong performance in terms of cash generation. Page 15, you can see here how we do -- we have the test of covenant on the net financial position over the EBITDA. As planned, we are below the 3.5x despite we are including both the debt for Intesa and acquisition of the minority stake in direct generation from Intesa and the minority stake from Bregal. So it means that the very strong cash generation allowed us to keep a well-balanced ratio and well-controlled financial situation. Like I said, we have more nonrecurring free cash flow components driven by the cost that I have already mentioned. And obviously, the net financial item is a very small portion. I would say, I would jump to the business unit in order to give you more color around our operations. Infocert went up to 3.8% compared to previous year. I would say that all the different legal entities performed reasonably as we expected. We had no major variances. Finally, also Ascertia that has not been mentioned up to now means that went finally well. We had a strong Q2, and this is an encouraging situation. The positive development of this activity and combined with a tight cost management control, allows to jump up already above 30% in H1 while generally, we will achieve this percentage at the end of the year where we have a little bit more revenue there. So I think we are glad of the results and the potential of the company is there. CapEx has been managed accordingly to previous year. And so we had -- as you can see here, we had -- we lowered the production cost by 5%, G&A cost by 8%. So we had a combination of revenue growth as well as cost, strong -- addressing strong actions on the cost side. Cybersecurity, unfortunately, is down quite significantly the system integration activities that from one side are bringing lower contribution. From the other side, we have a range [Audio Gap] of fixed cost, I would say, immediately to the structure of the revenue and this is heavily impacting our results. Nevertheless, we were able to basically absorb EUR 5 million out of the EUR 7 million of revenue decline, but still many actions already put in place that will deliver a best situation, best results over the second part of the year, although we are not expecting actually a recovery in total revenue. If we go to Business Innovation, like I said, we are overall glad of the results delivered because unfortunately, we need to taking out ABF from this picture. And ABF, we know that we have a tough situation there, mainly driven from the market, although the company is trying to address this shortfall in terms of revenue. For the rest of the business, we are in a situation where financing grants overall are improving over the previous year. We are in the middle of the campaign for the iper-ammortamento. The level of incoming orders is satisfactory. We have a challenge in front of us, but so we have a target by the end of October to collect orders. And we are -- as of now perfectly on the trajectory, and this will help us to deliver a very strong Q4 because most of the revenue will be delivered when the investment of our customer will be finalized and put on working. And at that time, we will be able to deliver a very strong result. We do expect to fully achieve the results of the plan -- the initial plan of the business unit by the end of the year, excluding obviously what is happening relating to ABF. But this is -- I think it's very important. It's a step there. Also, we are trying to implement streamlining activities that we -- for which we will benefit in the second half of the year. I'll leave now to Josef for the final comments.

Yes. So closing remarks on Page 22. Following the first stage financial results, the Board of Directors updated the group targets. You can find them on this slide. Revenues are now expected to be anywhere between 0% to 2% growth versus the prior year versus the 3% to 4% growth that we had disclosed back in March '26. The EBITDA adjusted is now expected to grow between 2% and 4% versus the 6% and 7% that we had disclosed in March. And lastly, the net financial position over EBITDA adjusted or leverage ratio is expected to be anywhere between 3.3 to 3.4x versus the 3.1 and 3.3x we had discussed back in March.