Tinexta S.p.A. (TNXTM.XC) 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 30th September 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, and good afternoon to all of you that joined this call. This is Tinexta's 2025 9 months results. Here with me today, Oddone Pozzi, Group Chief Financial Officer.

Good afternoon, everybody.

As a reminder, all the relevant documentation of the 9 months 2025 results can be downloaded from our company website in the Investor Relations section. For the purpose of this call, I will go over key strategic items of the call. Oddone will go over instead the 9 months 2025 financial results as well as the business unit's deep dive, providing us with all the insight. At the end of the call, we will have the dedicated area for 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, I will kick it off by turning to Page 5 of the presentation. So results on a 9-month basis ending September 30, 2025, reported revenue at EUR 347 million, growing 14% versus prior year. Adjusted EBITDA came in at EUR 63 million, growing 12% versus prior year. EBITDA on a reported basis was EUR 55 million, growing 20% versus the prior year and net profit on an adjusted basis was EUR 15 million. Net financial position came in shy of EUR 300 million versus the EUR 322 million registered on the fiscal year '24, while free cash flow on an adjusted basis was very strong, registering EUR 56 million for the 9 months or 47% versus prior year in terms of growth. Turning to Page 6. So 9 months registered double-digit growth and a very strong cash flow generation. As we mentioned, EBITDA adjusted was EUR 62.7 million, which was mainly driven by the strong growth in Cybersecurity due to Tinexta Defence's contribution. Digital Trust results, while positive, were still impacted by the delays in Ascertia's performance. Business innovation figures still lagging due to the political unrest impacting subsidiaries in the French market, in particular, ABF. We will give you a very detailed description of what is going on in ABF. And also, we registered during the third quarter of Business Innovation, a strong contribution from Industry 5.0. And even on this item, we will give you an in-depth description of what is going on in that particular side of the market. EBITDA, on a reported basis, as I said, grew 20% versus prior year, and that growth was due to lower charges related to LTI incentive plans. EBITDA adjusted margin was 18%, mostly in line with prior year and EBITDA reported margin was even better than last year, close to 16% versus the 15% of the prior year. EBIT on a reported basis instead was negative of EUR 26 million due to some impairments of goodwill related to the acquisitions and EBIT on an adjusted basis was positive EUR 31 million. Net profit adjusted was already commented, while the net profit on a reported basis was negative EUR 16.5 million. Net financial position was a little bit shy of EUR 300 million. The decrease in the net financial debt in the first 9 months reflects the solid cash flow generation, positive put adjustments and a lower impact from acquisitions. Free cash flow of EUR 56 million, very strong versus the prior year, mainly reflects lower CapEx and cash taxes during the period. Net financial position over LTM EBITDA adjusted came in at 2.55x versus 2.8 on a pro forma basis reported as of December 31, '24, or 2.9x on a reported basis. In terms of BU, Digital Trust grew mid-single digit at 5%. EBITDA was a bit lower than 4% in terms of growth. Margin was still strong at 29% in terms of EBITDA. Cybersecurity grew 37% in terms of top line, while EBITDA was very strong, growing 71%, mostly and entirely driven by Tinexta Defence's contribution. Business Innovation grew 9% in terms of top line, while decreased around 9% in terms of EBITDA. Maybe the most important part of this slide, aside from the numbers that have been commented are the recent events and updates, in particular, let me draw your attention to a couple of items. Mostly, I would say, in July, we had the purchase of 70% of LextelAI on one side. And then maybe the most important item, obviously, is the announcement on August of the signing of a binding agreement for the purchase by private equity funds, Nextalia together with Advent of a stake in Tinexta's ownership from Techno Holding. The stake is around 38.74% of the company's share capital at a set price of EUR 15 per share. Following the announcement of August, let us all recall that in September, we exercised the call option for the remaining 35% of Ascertia, which was paid for around GBP 8 million or EUR 9 million. In October, we received the approval of the EU Commission regarding the above transaction related to the sale of Tinexta shares from (sic) [ to ] Nextalia and Advent in compliance with EU antitrust regulations. And just a couple of days ago, in November, there was the conditional resignation of the majority of Tinexta S.p.A.'s Board of Directors and subsequent calling of the shareholders' meeting for December of 2025. Let me turn to Page 7. Even though most of these numbers have been commented, maybe it's important to highlight here that net profit on an adjusted basis was around EUR 15 million, and the free cash flow was very strong at EUR 56 million, growing almost 40% versus the prior year. Let me wrap it there. I think Oddone will go over the financial results, turning to Page 9. Oddone?

Okay. Thank you, Josef. As anticipated by Josef, you may see here the quick overview of the group results, like we said, overall, and then we will deep dive in details. Overall, revenue went up 13% compared to previous year and EBITDA adjusted went up 12%. If we go in details into the business unit, we have here Digital Trust is continuing to grow 5% in revenue and almost 4% in EBITDA. Cybersecurity overall has been growing significantly by the contribution of Tinexta Defence, formerly Defence Tech. And overall, the contribution of the business unit went up close to revenue EUR 100 million with 37% increase, while the EBITDA is almost double than the previous year, moving from 8.5% to 14.5%. In the Business Innovation, we have revenue going up, but EBITDA is going down. We may say that this is a temporary situation driven by the mix of revenue and from the expectation of Q4. If we go in analyzing in detail the results of basically, the Digital Trust, we may see here very clearly that Digital Trust overall, if we exclude Ascertia, that is not performing accordingly to expectation this year, all the rest of the business, means the vast majority of the business is growing basically at 10% EBITDA, and this is definitely very positive. In Cybersecurity, Tinexta Cyber is almost flat. Unfortunately, the expectation we had at the beginning of the year has been -- it has been late by the end of Q3, with a flat results both in revenue and EBITDA, while Tinexta Defence, if we compare here only the 2 months, the company was able in just 2 months to improve the EBITDA of almost EUR 1 million. In Business Innovation, and we will deep dive later on also on the future. The EBITDA is down by EUR 2.1 million in basically in Tinexta Innovation Hub in warrant. We have a higher impact of labor costs while we are expecting a significant growth revenue in the last part of the year. ABF is performing less than previous year in terms of EBITDA, while Antexis/Lenovys is slightly improving in the comparison with the last -- the 2 months of the previous year. Tinexta is reducing its cost by EUR 0.5 million. And the component of the noncomparable business or I mean the change of perimeter of both Lenovys and Tinexta Defence is significantly improving, and this is driving to the growth of almost 12%. If we go to the P&L, I will -- basically, we talk about the revenue growth and where the revenue is coming. I would say that overall, the profitability is aligned with the previous year. We are talking about an EBITDA adjustment almost around 18%. In terms of depreciation, amortization and provision, obviously, here, we had -- we went through some impairments from one side. And from another side, and we may see this in the financial cost and expenses part, some profit. So we had some profit that already occurred during the first 6 months. We released basically some debt related to put of ABF and Ascertia and this brought to a profit in the range of EUR 19 million, while we went through impairment of EUR 25 million in ABF and the remaining part is related to CertEurope and also Ascertia. Financial charges, net of all not ordinary items are going up from EUR 6.5 million to EUR 9.3 million, but this is mainly related to the higher average exposure that we had as last year, we completed the deal of Tinexta Defence Tech in July 2024. The result is what already Josef mentioned. On a non-recurring basis -- on a recurring basis, sorry, on adjusted basis, we see here basically the EBITDA going up 12% and the EBIT is going down by 3%. If we move to the balance sheet, the company has continued in a very positive way, it's deleverage from one side and the proper invested capital management. So basically, the invested capital drop by almost EUR 60 million, obviously, including the goodwill impairment by EUR 20 million. But for the rest, obviously, it's a better management of working capital compared to the position at the beginning of the year as well as the amortization of fixed asset has been lower than the CapEx than during '25 are significantly declining compared to previous year. Net financial position at the end went down exactly as expected. Here, I would highlight and I will explain in more detail that adjusted free cash flow of the continued operation peaked EUR 56 million cash generation. I would say this is obviously one of the peaks -- historical peaks of the company, perfectly aligned with the company expectation at the beginning of the year. If we go to the net financial position and in more details of the free cash flow, as you can see here, on an LTM basis, we are almost close to EUR 60 million on a like-for-like basis. So it means a very, very positive results. And obviously, this is as part of the strict financial management, where we basically work on CapEx management, on working capital management despite the growth of the revenue, if you compare with previous year of EUR 40 million, still the working capital has been affected by only EUR 4 million, and we do expect even better results in Q4. So the free cash flow compared to previous year is going up of 46% as a result of a solid management. The net financial position bridge from the beginning of the year. As you may see here, financial charges are in the range of EUR 9 million. The company has distributed dividends by EUR 19 million. The net between acquisition and put is basically close to 0, and we have no other main items. So we are at the end of Q3 with a net financial position below EUR 300 million with the net financial position EBITDA that is dropping from 2.8 to 2.55 and is even expected more to drop during Q4. And if we move to the LTM, overall, the picture is almost the same with a few different details. But overall, the trend is what already highlighted. Let's go now to deep dive into the business unit. Like I mentioned before, the revenue of Digital Trust is going up by 5%. Like I said, the business is going well. And you see most of the product lines are going up, and we are really glad to the level of growth of the part of online channel that is going up after the renewal of, say, the selling website that occurred at the beginning of the year. After 9 months, we are up 13% compared to previous year and the Q3 only is going up 50%. It means that, obviously, the market in the B2C segment is very positive looking at Infocert product and solution, and this for us is a key indicator. And also the investment that we put last year in the CapEx relating to this project are giving a very interesting payback. We are -- LegalCert revenues are going down 3%, but this is still basically affected by the delay in sales of Ascertia's proprietary PKI product license in Middle East that probably -- definitely will be lower than compared to what expected. So if overall looking at these figures are lower than what we presented in the past. But again, this is a temporary situation because we expect a strong recovery during Q4. At the end of the day, the core and the business is very solid, it's growing and the only delay is related to Ascertia. Cybersecurity business. So 2 different situations. If we move to Tinexta Defence, I would say this is a very, very positive result. I may say that Tinexta Defence peaked revenue at EUR 31.1 million on 38% on a pro forma basis. 2/3 of the business are related to defence market and 1/3 to the cyber market. So I would say the very solid plan that was at the base of our investment 1 year ago has been fully confirmed. The company is performing well. The level of the growing revenue is what we do expect. The EBITDA is growing more than 20%, perfectly accordingly to our expectation. The decline in EBITDA margin is something that was fully factored already in our guidance. If we move to Tinexta Cyber revenues, I would say that the company, at the end of the day, delivered results fully aligned with the previous year. Obviously, this is not what we expected at the beginning of the year, but still in a market that has been severely under pressure because of the -- in general of the competition and on the pricing pressure. And the market overall -- we know that the IT market overall is growing by 4%. We are playing -- part of our revenue are coming from a segment of the business that is not growing so much while it is growing the component of the Cybersecurity. Obviously, we are late in some activity like advisory activities, where we are -- we have a decrease of more than 20%, and this is not exactly what we would expect. For the remaining part of our technology solution, we are growing mainly -- the growth was mainly attributable to proprietary product component. Overall, I would say the segment -- our segment peaked EUR 14.5 million, that is significantly higher compared to previous year. Also the revenue in 9 months is very close to EUR 100 million. In Business Innovation, I think basically, we have a situation where we were able to grow in some part of the market. The Italian finance and grant market was up 4.1%, driven by the segment of Industry 4.0, Industry 5.0 and Patent Box. And we have also a growth in digital market business by 22%. Obviously, the digital marketing revenues are delivering a lower percentage compared to finance and grant, and this is driving basically the lower margin compared to previous year. Very different situation is related to ABF. I think here, I think it's important to share with all of you, which is the state-of-the-art situation. We know that the French political environment has been dramatically changed, unfortunately, since we invested. The company last year struggled because of the change in the market, where -- but the company has been able last year as well as this year to continue to improve its capability to get order from the client. Unfortunately, the filing of dossier into the relevant commissions has been continued very well. But unfortunately, the success rate of this filing has dropped from 70% of '23 to close to 40% in '24 and 33% in '25. The change of the market has been dramatic. France, [ the military ] that was basically the key part of the business of the company that accounted for more than 60% of the revenue in 2023 last year accounted for like 20% and this year will account for even less. So this is basically a very -- a situation that has been -- is obviously very tough in this moment. The company is reacting, continue to produce a very good level of backlog. The company is cutting the cost. And I would say the company is trying to evolve the go-to-market with the new proposition, with a new methodology that allow to still delivering profitability, although the market is under pressure by the political situation. So this is something that obviously was absolutely not expecting even in the size of what happens -- what happened, sorry.

Okay. So we -- on Page 22, Oddone gave us an overview of the ABF situation. I think it's very clear that KPIs, macroeconomic environments, different governments that have succeeded, others that most of them have failed have brought into a very depressed overall macro environment in France, definitely hitting our performance. For that matter, turning to Page 23, let me walk you through the updated guidance, which was, at this point, a requirement. In fact, with this persistent uncertainty, this led the group, in particular, to the Board of Directors to reexamine the 2025 outlook, confirming on one side, the overall expected consolidated revenue growth between 11% and 13%, with a slight offset in the organic guidance going from 7% to 9% to 6% to 8%. So the prior organic guidance was 7%, 9% and is now expected to be 6% to 8%. So again, a slight offset. In terms of EBITDA adjusted, parsing out ABF, growth is expected to grow between 12% and 14%, which is in line with the expectation and showcasing also a very strong underlying business growth, again, aside from ABF. If instead, we were to include ABF, the EBITDA adjusted is expected to grow in the range of 8% to 10% or 3% to 5% on an organic basis. And this is necessary also to kind of give you an outlook of where the EBITDA is growing. On the side, you can see what were the expected growth when we gave the guidance back on March 6, 2025, respectively, 15%, 17% growth and 10% to 12% growth in terms of organic. In this scenario, the leverage ratio for the end of the year is expected to land at around 2.4x, so slightly above the forecast range that we gave in July, but absolutely in line with what we said at the beginning of the year. So this is, I think, a very important highlight. Now carrying forward, we must say that on November 7, which is just a couple of days ago, a directorate decree was published by the Italian Ministry of Enterprises and Made in Italy, the so-called MIMIT, which drastically changed the scenario for the tax credit plans Industry 4.0 and 5.0 by cutting the ladders, therefore, the Industry 5.0 available funds from EUR 6.3 billion to EUR 2.5 billion in a retroactive way. This resulted in, like I said, a retroactive exhaustion of the planned funds, also considering that the amounts reserved on November 5 were reported EUR 2.52 billion already. This led to a sharp increase in applications related to 4.0, implying as well that the imminent exhaustion of that related fund as well. According to the latest official updates and statements, the ministry's intention is to refinance the plan with new funds based on the number of reservations currently rolling in the platform. The potential effects of these new developments on the group's results are currently being evaluated, also considering potential mitigation measures which could reduce the impact and may lead to further revisions of the outlook for the year. But I think it is mandatory and necessary for all and everybody to know. Oddone, please?

Maybe -- okay. Thank you, Josef. I think a little bit of more color to help you audience to better understand. Obviously, very clear, as already stated, we wanted to show you a guidance keeping apart ABF that is impacted by the situation that is really unique. Still, there is a level of ambition in this guidance, but I would say that we do expect a growth of more than 10% compared to Q4 last year in Digital Trust. And honestly, we have almost in our backlog, a very big deal here for which we do expect to deliver it by the end of the year. So this is a reinforcement of our vision of the part of the year. Defence Tech is expected to grow in Q4 exactly at the same pace of the first 3 quarters on a pro forma basis. So basically more than 20% in terms of EBITDA, and this is obviously very, very reasonable. Where do we have a little bit of more challenges? Obviously, last year, Cybersecurity delivered EUR 5 million EBITDA in Q4. We do expect it to be above EUR 6 million. But also here, as you have seen, we had some sales of products in the first part of the year higher than previous year. And we do expect the same trend to occur in the last quarter. As far as concerned, Business Innovation, if you exclude ABF, honestly here, we do expect to grow in the range in terms of EBITDA of 10%. Obviously, we have already all the orders in our end to deliver this result. But what has been issued on -- like Josef mentioned on November 7 is jeopardizing a bit the framework. We are working and accelerating our activity with our clients. We will be ready to file whatever 4.0 or 5.0 opportunity. There has been a lot of media disclaimer on this subject even today in many websites and newspapers. So it's a relevant matter. You may understand here when they decide to cut as of today, but still we may think that something could happen in the following days. You can imagine that there are some entrepreneurs and company that has already invested millions of euros of hundreds of thousand euro for the PMI companies, basically referring to a law that was expecting to be up to EUR 6 billion to be distributed and then suddenly here. So we are -- we want to share this information that can impact the results of Business Innovation. Today, we have no exact figure to share and communicate what it is. If we exclude this, obviously, this was, since we told since the beginning of the year, a key point of our growth in the last part of the year. And at the end of the day, we are expecting to grow year-end around 5% in EBITDA compared to previous year in Business Innovation that this is not a very challenging picture, driven by the capability of deliver the 5.0. Unfortunately, this news has been happened and we are dealing with it, and we keep informed. And last comment, so if we exclude ABF, honestly, the company is delivering basically aligned in terms of EBITDA with the expectation to the ABF. And I would reinforce the focus on the solidity of the company and the capability to delever the company because despite all the leverage, it is expected to drop to 2.4. Today, we are already at 2.5. So this is exactly aligned with the guidance as of the beginning of the year. So it's confirming the solidity and capability to generate cash from the group.

Okay. Thank you. Operator, if there's any questions, I remind everybody that we accept questions from financial analysts. So please, if there's any questions, operator, please let us know.