TXT e-solutions S.p.A. (TXT) Earnings Call Transcript & Summary

Good morning. Let's wait a few seconds so everyone can join the call.

Make an introduction, Alice.

I'm Alice -- Alice Lacey Freeman. Okay. Good morning, again, and welcome to our Investor's call. Today, we will be presenting the 2024 financial results of TXT Group. Today next to me, we have Daniele Misani.

Good morning.

Our CEO of TXT Group, we're connected from Milan. Instead from Berlin, we have Andrea Favini, our Financial Investor Relator. And before starting discussing the results, I just wanted to let you know that if you have any questions, please feel free to add your question in the Q&A section and we will be happy to reply and answer to all of your questions at the end of this call. So -- okay, thank you very much. And I'm going to give my word to Daniele Misani.

Thank you, Alice. Thank you. So we are here to discuss the results of 2024. 2024 was another strong year for the TXT Group. Total revenues are above EUR 300 million, so EUR 300.5 million with a growth of 36%. What is important to highlight that, of course, the growth is part of aggregation, M&A of companies that joined the group as we did in the last 5 years, but we have strong results also on the organic growth side. So 22% growth, EUR 50 million more. This is due to our sustainable plan of synergies between among all the companies belonging to the TXT ecosystem. So the strategy to do upsell and cross-sell and to do synergies is bringing results. So we are growing in every sector we are present. So we are very strong in making things happen and in making growth in terms of organic each company in the group. The EBITDA result is positive, EUR 39.2 million, 24% more with respect to the last year. And we registered a slight, let's say, decrease of the EBITDA margin, 13% due mainly to the fact that the mix of the activity has changed during 2024 and we sustained the growth with investments in terms of commercial investments and R&D investments. In terms of operational profit. So EBIT, consolidated is EUR 25.5 million. So it's 8.4% million total revenues. If we look to the adjusted EBIT, so considering the fact that we have effects of PPA and, let's say, acquisition we did in 2023. So the adjusted EBIT is about 10%. More detail will come with Andrea in the financial section. In terms of net profit is EUR 15.9 million, almost EUR 16 million with a growth of 3% with respect to the last year. So the reduced growth was mainly due to impacts of, let's say, financial debts that we have to pay. And so also this part will be addressed by Andrea in the financial section. We proposed a dividend of EUR 0.25 per share that is in line with the last year and our policy to distribute part of the net profit to the shareholders, of course, but to keep also the most part of the cash we generated in order to continue with our plan of M&A. In terms of growth, let's say, the important thing to highlight is that it's common in all our divisions. So 36% total growth, EUR 305 million comes from contribution for all the business lines. In particular, I want to highlight the Smart Solution part that is growing very faster. So plus, almost 50%. We know that this part is contributing more for the EBITDA margin. And if you look also to EBITDA margin of the Smart Solutions division, we get plus 43%. So a strong growth due to the investment we did in the past and the market positioning that is growing for the Smart Solutions division. But also the other divisions are growing fast, Digital Advisory, especially 41% growth with a contribution of 20% more EBITDA margin. And we have a growth also for the Software Engineering. So all the segments are growing. Of course, the mix of the growth in the segments brought to this dilution in the EBITDA margin but we will focus for 2025 to be more focused with respect to profitability with respect to growth. So we will focus on the business lines that are more profitable in order to increase our overall EBITDA margin. In terms of investment, we continue with our policy. So the strong growth for the Smart Solutions division is due also to the investment we do in technology. So we invested 65% more than last year in our technologies so EUR 15 million in order to adopt of the breed technologies in our solution to improve the value for the customer. Revenues in Smart Solutions are growing EUR 64 million, plus, almost 50% with respect to the last year. In terms of, let's say, market exposure in terms of geography, we continue to grow also internationally. So EUR 78 million comes from the international business that is 25% of the total revenue. So there is a slight decrease in terms of percentage because we grow a lot also in the domestic market. But for us, a strategic focus to continue to make grow the international exposure and our presence abroad. So outside from the domestic and the Italian market. In terms of debt, we are investing. So last year was a particular year for M&A because we acquired, let's say, stronger value and companies that improve a lot our perimeter. So the investment made for M&A in 2024 was quite strong. Our net financial position now is adjusted EUR 91 million. But still, we have treasury shares at 31 of December was more or less EUR 11 million in our portfolio, so that we will use to continue our investment plan. In terms of market incidence, our diversification strategy brought us to offer more in several segments. So last year was the year of investment for the MarTech domain. That is a new market segment that we added to our portfolio, now is still 5% because the consolidation of the perimeter was limited in 2024 will be stronger in 2025. So we completed a little bit our vision of diversification by aggregating company to create value, to create synergies among the offerings that we have in our portfolio. What is important to highlight is that the growth is quite common in all the market segment we address. So we have growth in almost all sectors. A little bit lower the industrial part because there are some market pressure on this kind of segment. So it's a bit slow with respect to the rest of the, let's say, segments in which we are present. But let's say, still, we are growing. So if we look to the overall growth organic that is more than 20%, we are well above the market average because the overall ICT market last year was growing at about 5%. So we are 4x faster than the rest of the competitions that we address. The main segments that are growing, and that will continue to grow in 2025 are related to Aerospace and Defense programs that are multiyear programs in which we are involved. So there is investment in R&D, new solutions, and we are, let's say, following the leaders in this kind of environment, providing technology for the main programs that are underinvestment in this period. So this area is growing fast in a good way. And the other, let's say, segment that is growing very fast is related to public sector. So you know that we invested and we gained a big backlog in tenders won in the past years. And so the team is starting to deliver at a high rate, let's say, we are growing very fast. And also the acquisition that we did was to empower our portfolio to be, let's say, more effective also in this area that is an area that will give growth for the next few years given also the strong backlog that we have in this area. As I said before, let's say, the results are good. We have to look also to the pro forma results because the acquisitions were made in the second half of the year. So the impact on the consolidated results is limited. If we look to the pro forma, we have already more than EUR 350 million in terms of total revenue. So we are starting the year with a strong positioning in terms of pro forma results. And looking to EBITDA pro forma, we aggregate, let's say, high value, high profitable companies that bring us at EUR 50 million pro forma to 2024 results with a pro forma EBITDA margin of 14%. So in line with our guidance. And this led us to start 2025, very confident that we can improve profitability and continue to grow the size of the overall group. In terms of guidance, 2025 is in line with our strategic plan. So we are -- we want to continue to grow. As I said before, we will focus more on more profitable business in order to keep the EBITDA margin above 14% in average. This year, as I said, the consolidated was in line, but we are now implementing several actions in order to continue to perform at higher profitability. And so the contribution also of the last acquisition will give us a boost in this direction. We will, let's say, continue to grow in terms of organic growth, probably 2025 will be a little bit lower with respect to exceptional result in 2024. So our guidance is to be above 8%, overall. I want to highlight that we have also some one-off activity in 2024 that would be not in 2025. So we have to compensate this. So in terms of overall growth, so our guidance is above 8%. Of course, we will continue to invest. So we already announced an extraordinary operation in the last weeks. And our, let's say, guidance is not to overcome the 2.5x the EBITDA pro forma. So there is this space with our, let's say, treasury shares and with the cash we generate to continue to grow by giving the guidance not to exceed 2.5x the EBITDA pro forma. In terms of evolution of the business, what I want to highlight that we are quite confident for the 2025 to continue on the good momentum that we have. In the Smart Solution areas, there are opportunity to grow again, especially in the Aerospace and Defense, let's say, perimeter for which we have a strong value proposition, and there are a lot of investments. So it's an area that will bring benefit in terms of positioning of Smart Solution domain but also the fintech is very important for us in 2025. We strengthened the team by acquiring a strong manager from the market that was the former CEO of SIA, Nicola Cordone that joined our team to coordinate the fintech offering and to make growth almost, especially the Smart Solution positioning of our portfolio that is positioned quite well, but has the opportunity to scale up faster than in the last few years. In particular, for the digital payments, domain will be an area in which we will invest to continue to grow and to create value. Also the MarTech offering with our Smart Solution, let's say, offering is a potential growth driver, especially for international business because the MarTech today exposed -- not so in a strong way, aside from the domestic market, but we started initiatives in order to expand the geographic, let's say, presence of our offering across Europe and North America. Digital Advisory will continue to grow, driven by the public sector domain in which we have still to continue to deliver the projects that we won, and we are still acquiring new contracts. So as discussed in the previous calls, we acquired big also contract for the cybersecurity in the space domain. So we have all the possibility to continue to make profitable business with the backlog that we have already acquired. And also the integration of the MarTech offering in the Digital Advisory domain will give a boost of growth of this division. In terms of Software Engineering that is the, let's say, the division with a lower EBITDA margin, we reached very good, let's say, size. So our focus will be not too much to make grow this area but to capture more profitable, let's say, projects, especially in the Defense area, which margins are better with respect to other areas. The Webgenesys contribution that will be consolidated in Software Engineering division will give a boost also to the overall profitability because Webgenesys is strong, with the delivery team very well structured. They manage complex project at the fixed price. So we have the possibility to position ourselves and to have better results in terms of profitability. In terms of M&A strategy, we will continue. So our vision was to diversify in terms of market reach. But we -- let's say, completed a little bit our vision of diversification in terms of end market. What we are doing now is to strengthen the offering of each segment but following the model to have these 3 divisions, so Advisory Capability, Software Engineering and Smart Solutions. So the last 2 acquisitions were made in order to strengthen the end-market public sector by adding Software Engineering and Smart Solution capability to an area in which we were exposed mainly with Digital Advisory. We announced 2 weeks ago, the signing of a contract to acquire IT Values that is a small boutique but very profitable with a set of proprietary solution mainly, let's say, channeled towards the public sector domain. So it's a good, profitable and open up a lot of opportunities to bring value across, let's say, the value chain of the public sector domain also across by leveraging the tenders we won. And so for us, it's strategic to have as much solution offering dedicated to a segment for which we can deliver more. So the strategic decision to acquire IT Values is made in order to bring assets towards an offering that for now is mainly based on services. So this -- will improve the growth in the public sector domain and will improve the overall profitability of the group and of the division, of course. The closing of this, let's say, this M&A is planned to be completed in April. So results of IT Value will be consolidated starting from the second quarter. IT Values follow, let's say, the strong, let's say, impact of the acquisition of Webgenesys that we closed at the end of the year, so [31 December]. So end of the year, New Year's eve more or less. Webgenesys for us is strategic because add software engineering capability to our public sector offering with the team very strong in terms of delivery organization and with a very strong also backlog for the next 3 to 4 years. So with the acquisition of Webgenesys, we acquired a backlog of more than EUR 200 million in assigned tenders. Most of them -- half of them are already operational. So there is a strong opportunity to create value across a mid-long-term by -- including this kind of offering within our portfolio. There is a substantial top line expected in 2025. So the contribution from Webgenesys will be more or less EUR 45 million with the growth of -- with respect to the past years and also the contribution in terms of profitability is significant because the efficiency and the capability to deliver that Webgenesys demonstrated in the last few years, will continue and will give a boost also to the overall group results. This acquisition for us is also important to cover geographically more Italy. So we have a strong presence in South and Central Italy with Webgenesys. And of course, the competencies that are within the team will be an addition, a strong addition to the already strong technological capability of the group. Let's say, the results of Webgenesys are not consolidated in 2024 since it was closed at the end of the year but we will -- they will give a strong contribution to overall group in 2025. So we will continue in this direction to aggregate competencies, to aggregate assets in order to have a more let's say, complete offering towards the end markets in which we are present. And we want to continue to grow in terms of geographical presence also international and bring value for all the stakeholders. So I finished this part, that is the introduction, Alice.

Thank you very much, Daniele Misani. And now Andrea Favini, our Investor Relator, will have the pleasure to discuss our financials.

Thank you, Alice. Thank you, Daniele, and welcome, everyone, to the financial section of this conference call. Starting from the profit and loss of the 2024, we have revenues broadly discussed by Daniele at EUR 304.5 million with an increase of 35.7% compared to 2023. And the organic growth was equal 22%, with a normalized organic growth, excluding the noncore activities at approximately 17% compared to the previous year. Looking at the gross margin in 2024, it amounted to 33.5% of revenues, down from 36.2% in 2023, following the different mix of revenues recorded in the year including EUR 12 million of noncore activities with a mid-single-digit margin below the average of [TXT]. And excluding the noncore activities recorded in the year, the gross margin in 2024 was approximately at 25%. Looking at the indirect cost, we have a research and development investment that grew by 65% year-over-year, a really significant growth which comes both from the organic investment in our Smart Solution portfolio but also from the acquisition occurred in 2024. The commercial costs increased at a lower rate, 12.2%, also considering the strong investment already did in 2023 to support the growth of the year followed by further investment done in the current 2024. Looking at G&A cost, general and administrative cost, we have an increase of 27.8% but the incidence of the G&A on revenues decreased from 7.3% in 2023 to 6.9% in 2024. And this result is coming from the efficiency of the holding structure, partially compensated by the effect of the increasing M&A costs that were of approximately EUR 1 million in 2024, up EUR 0.6 million compared to the previous period. So the EBITDA margin, as broadly explained by Daniele was below the 2023 and below the target, mainly for the different mix of revenues, but also for the strong investment that happened in the year. And let's keep in mind, the R&D is fully expensed in the profit and loss of the year. So the EBITDA margin of 2024 was at 12.9% down compared to 14.1% in 2023, but with an absolute increase of 24%. Depreciation and amortization and write-offs are equal to EUR 13.6 million in 2024 up 19% compared to 2023. Depreciation and amortization in 2024 consists of amortization of intangible assets for EUR 4.9 million of which EUR 4.1 million are related to purchase price allocation. The latter be in line with 2023 and the depreciation of tangible fixed assets for EUR 6.6 million in 2024, of which EUR 4.6 million are related to IFRS 16. Write-offs in 2024 were equal to EUR 2.2 million compared to the EUR 0.6 million in 2023, primarily related to goodwill impairment from previous year acquisition for EUR 0.7 million and EUR 0.6 million related to accrual of bad debt provisions, including EUR 0.6 million related to the bankruptcy proceeding of one of the main [eVTOL] European player that happen in Q4 of 2024. If you look at the operating profit, the EBIT reached EUR 25.5 million in 2024, growing by 26.5% compared to the EUR 20.2 million in 2023. The adjusted EBIT for financial year 2024, which neutralized extraordinary items related to impairment write-offs for EUR 1.7 million and amortization resulting from the purchase price allocation of companies acquired in the previous year for EUR 4.1 million will stand at $31.3 million up 29% from EUR 24.4 million in the previous year, 2023. The adjusted EBIT margin was 10.3%, 0.6 percentage points below the adjusted EBIT margin recorded in 2023. The net financial result of 2024 resulted in a negative net balance of EUR 3 million, a drop of EUR 3.8 million compared to the net positive balance of EUR 0.8 million in 2023. Financial expenses in 2024 amounted to EUR 5 million, increasing by EUR 1.9 million compared to 2023. And mainly due to interest expenses on new loans. Among financial income in 2024, we have a total of EUR 2.4 million, significantly lower compared to the EUR 5 million in 2023. And among financial income for the year, the fair value effect of portfolio securities amounted to EUR 0.9 million, up compared to the EUR 0.6 million in 2023. And the fair value effects of liabilities related to past M&A transaction was EUR 0.9 million, down compared to the EUR 2.9 million of 2023. The dividends for 2020 -- the dividend received in 2024 was EUR 0.3 million, up compared to the EUR 0.2 million in 2023. 2023 financial income also includes the fair value assessment of the investment in Banca del Fucino for EUR 1.2 million, which was [nil] in 2024. And there are also the results from nonconsolidated minorities, primarily ReVersal SIM, with a negative balance of EUR 0.6 million in 2024. The net exchange effect on foreign currencies had a positive balance of EUR 0.1 million in 2024 against a negative balance of EUR 0.3 million in 2023. Looking at the net profit, there is -- it amounted to EUR 15.9 million in 2024, up 2.6% compared to 2023. The different growth trend of net profit compared to the operating profit in 2024 is mainly due to the different financial result reported during the year 2024 compared to 2023 and for a lower impact to the 2024 tax rate, which stood at 29.4% compared to the 26.2% in the fiscal year 2023. The adjusted net profit, which excludes the accounting effects related to PPA and the goodwill impairment from previous year M&A and the financial income related to M&A accounted for in the period mainly related to the fair value of liabilities for earn-out and [put-call] is equal to EUR 20.9 million, up 24% compared to the 2023 with an adjusted net profit margin at 6.8% in the year 2024. If we look at the fourth quarter of the 2024, two slide up, please -- so looking at the Q4 of 2024, we have revenue that amounted at EUR 85 million with an increase of EUR 19.9 million compared to the EUR 65 million of the fourth quarter of 2023 plus 31% with the EBITDA that was EUR 11 million, up from the EUR 10.2 million of the fourth quarter of 2023 with a plus 8.8%. The EBITDA margin for the fourth quarter of 2024 stood at 13.1%, down from 15.7% in the fourth quarter of 2023. With the net profit that was EUR 3.9 million compared to the EUR 5.7 million in the fourth quarter of 2023. And this is mainly to be attributed to the different financial results in the period, we have a net effect of EUR 1.3 million. And also to the different tax rate that in the fourth quarter of 2024 was of 22.1% compared to the 19.4% in the fourth quarter of the previous year 2023. Here, it's clear that, of course, the growth in the R&D cost, which is 91%. And this growth, of course, includes also the acquisitions of ProSim, Refine and PACE Canada, partially not included in the fourth quarter of 2023. Also here, it's important to mention the effect of the commercial cost, which shows a decrease of 3.1%. This is mainly related to the different effect of variable components in the fourth quarter of 2023, which grew also compared to the first 9 months of the year, while in the fourth quarter of 2024, there were, let's say -- there was not a strong increase in the, let's say, bonus and they're not -- and in the year, let's say, variable components and that drove a 3.1% drop in the commercial cost of the fourth quarter 2024 compared to the same period of the previous year. And if we go to the next slide, we have, let's say, our net debt position which is equal -- the adjusted net debt position is equal to EUR 91 million as of 31st December 2024 with an increase of EUR 59.3 million compared to the EUR 31.4 million as of December 31, 2023. This increase of EUR 59 million was mainly driven by cash outflow for acquisition. Net of the acquired net cash for total EUR 56.5 million, the recognition of earn-outs related to 2024 acquisitions, net of write-off of M&A-related liabilities from previous years for EUR 5.1 million. Then we have let's say, effects of IFRS 16 for new leased contracted in the year, net of installments paid during the year for EUR 5.1 million. We have also the effect of the repurchase of treasury shares for EUR 1.5 million and the payment of the dividend for EUR 2.9 million, plus the payments of interest for EUR 3.5 million. All those, let's say, cash outflows were partially offset by the increasing by the, let's say, cash flow coming from the operation, which in the fourth quarter a better trend compared to the first 9 months of the period. The main items of the net debt as of year-end 2024, consists of cash of approximately [EUR 50 ] million as with major Italian banks, up EUR 20 million compared to the year-end 2023, while the financial investment at fair value were of EUR 17 million with a decrease of EUR 7 million compared to the year-end 2023 mainly for the divestment incurring the year to sustain the M&A plan. The current financial debt net of current financial assets was at EUR 66 million in 2024, down compared to the, let's say, up EUR 8 million compared to the year-end, let's say, 2023. Among the noncurrent financial debt, we have EUR 119 million as of year-end 2024, with a significant growth, EUR 62 million compared to year-end 2023, mainly for new bank loans, let's say, contracted in the year 2024. The adjusted net debt as of year-end 2024 included EUR 15.5 million of debt related to IFRS 16 and about EUR 11 million of debt for earn-outs and put-call option for the purchase of minority interest. If we look at the reported, net financial debt, so excluding the adjustments, it amounted at EUR 109 million in 2024 -- end of 2024. EUR 18 million higher compared to the adjusted net debt of the period, mainly for the effect of the Banca del Fucino stake, which is reclassed among the financial asset in the adjusted net financial debt shown in the current slide. If we look at the balance sheet at year-end 2024, we have, let's say, total assets, EUR 215 million more or less with an increase of EUR 84 million, mainly related to M&A. Intangible fixed asset as of year-end 2024 are of EUR 160 million, EUR 159 million and consists mainly of goodwill for EUR 128 million and customer relationship and IPs linked to PPA on M&A for approximately EUR 17 million. The increase of the period is to be attributed to the acquisition of Webgenesys, I MILLE, Uasabi and Refine net of the amortizations of the period. Tangible fixed asset as of December 2024 are up EUR 28 million, EUR 29 million that includes mainly hardware, 1 building, rental and lease contract of offices, car and printers, option of the accounting standard IFRS 16. Tangible assets are up approximately EUR 8 million compared to the year-end 2023 and mainly following the increase in IFRS 16 financial lease and following the acquisition of the period. The other fixed asset consisted mainly of the investment in Banca del Fucino, with fair value of approximately EUR 18 million and the remaining value consists mainly of investment in minority. The value of other fixed -- the investment in minority is EUR 5.2 million as of year-end 2024, down EUR 0.4 million compared to the year-end 2023 mainly following the consolidation of ProSim from Q3 of 2024. If we look at the net working capital, we have an increase of approximately EUR 15 million, but it's important to state that here it's included, of course, all the current assets and liabilities of Webgenesys and Refine and I MILLE, all the acquisition concluded in 2024. If we look at the net working capital as a percentage of the pro forma revenues it's slightly better at year-end 2024 with a rate at approximately 16% down compared to the rates of the net working capital as a percentage of let's say, pro forma revenues of 2023, which show a rate of approximately 17% to 18%. And looking at shareholder equity, the growth of approximately EUR 36 million is to be attributed to the profit of the period plus the effect of the repurchase of the treasury shares and the transfer of this treasury shares in the context of the M&A plan. If we look at the next slide, starting from the shareholding structure as of year-end 2024, we have a drop in the treasury shares. We are approximately 2.5%, but a significant increase in the stake of managers. Within the 24% of managers, there are 2% -- let's say, a stake which are above 3% and below 5%, which consists of stake transfer in the context of the acquisition of Refine direct and Webgenesys respectively, in Q3 and Q4 of 2024. Looking at the TXT market data. So in 2024, the TXT share price recorded an official high of [EUR 27.05] as of December 13, 2024, and the low of EUR 18.94 per share on January 4, 2024. As of December 31, 2024, the TXT share price was at EUR 35.10 per share. The treasury shares as of 31 December 2024 were about 314,000, representing 2.4% of the issued share. Treasury share were EUR 1.3 million as of December 31, 2023, and the decrease is to be attributed to consideration paying TXT share in the context of the M&A plan, net of the TXT share repurchase in the context of the buyback plan. In particular, in 2024, approximately 1.2 million shares equal to the 9.3% of the share capital were transferred to vendors and current manager of TXT and around 230,000 shares were repurchased at an average price of EUR 24.12 per share for a total investment of approximately EUR 5.5 million, as stated before. In 2024, TXT paid a dividend of EUR 0.25 per share, which was paid on May 22, 2024, with a total outlay of approximately EUR 2.9 million. For 2025, based on 2024 results achieved by TXT, the Board of Directors proposed to the shareholders' meeting the distribution of a dividend of EUR 0.25 per share, same as previous year for each of the outstanding shares, excluding treasury shares for a total expected payout of EUR 3.2 million with a dividend yield of approximately 0.7% payout ratio, on the net profit of approximately 20%. And the dividend will be paid starting from May 21, 2025, with a record date of May 20, 2025, and the next dividend date of May 19, 2025. That's all for the financial section of this conference call. Now is the Q&A section. And thank you so much for your attention.

Okay. Thank you very much, Andrea Favini. And now let's start our Q&A session. We received some questions, and let's start with a question from Andrea Randone. It's a very long question, so we're going to cut it. So Daniele and Andrea can answer to all of your questions. And so let's start with the first question of Andrea Randone. Net working capital at year 2024 improved year-over-year. Can you comment what should we expect for 2025?

Yes. So net working capital is increasing. Let's say, the main fact is due to the -- is related to the growth that we had in the 2 industry end-user areas, industries that are, let's say, known for longer payment terms. So we continue to grow in defense, let's say, environment into the public sector domain. In terms of cost structure because the growth is related also to the growth in terms of the team and, in terms of let's say, suppliers. So costs grow and let's say, the payment terms are longer with respect to the average of the other areas. So the main impact is due to that. 2025 will be in line, let's say. We expect to be in line with 2024. Of course, we are implementing all, let's say, the organizational infrastructure in order to minimize risks of delays in payments. And so the organization is also evolving in order to increase as much as possible all the process -- to improve the process in order to have as minimum as possible the impact in this area.

Okay. Thank you very much, Daniele. Let's go to the second question of Andrea Randone. What are the general payment terms for newly acquired companies?

So it's in line with already the previous, let's say, acquisition for the public sector. So it's not particularly different from the past. So we think that also Webgenesys has a strong organization in terms of let's say, delivery and invoice process. So we think that overall, we will not have an additional impact with respect to the current situation. I don't know, Andrea, if you want to add something about this topic?

No, absolutely. So I think that there is a slight, let's say improve if you look at the pro forma revenues for the end of -- year-end 2024. And the expectation, yes, it's one, let's say, much different compared to that picture, but we think that a net working capital as a range of revenues -- in the a range of -- as a percentage of revenues in the range of 16% to 19%, 20% is something that we can expect also for 2025. Also we have some more, let's say, software business, which, of course, is better, let's say, net working capital compared to the service business. So the year-end picture on the pro forma results should be sustainable also for 2025.

Let's go to the third question of Andrea Randone. Thus the increasing exposure to public administration represent a risk?

I think that the question is more related to working capital than business-wise. So we think that on the business aspect, public sector is still an area which, especially on the domestic market, there are strong investments. So there are fundings coming also from European fundings that must be delivered also in the short midterm. So we don't see a particular risk in terms of volumes, in terms of, let's say, business continuity. We are involved in major, let's say, digital transformation programs across all Italy. So both in the central public sector than the local one. So we are very well positioned in order to have continuity for the short, midterm with these kind of bills, of course. So we are investing in it because we believe that there are also market opportunities that can be captured in this period that is also changing period for the landscape of the public sector. So we are very well positioned in order to continue to create value. In terms of payments, of course, like I said before, Also, the Webgenesys organization is very strong. So we think that overall, we can have an improvement. Of course, there is the usual risk of this kind of segment for which let's say, the payment terms are not historically so exciting, let's say, just to use some not proper word, okay? But we think that internally, we can organize ourselves in order to capture the opportunity and not have a strong impact on our profit or loss.

Thank you very much, Daniele. We have the last 2 questions from Andrea Randone. Another question is, are you considering deals such as Banca del Fucino disposal to increase your financial flexibility?

Yes, of course. So Banca del Fucino is something that was made as a financial investment when the overall net financial position that was different than now negotiating and we are moving, we are negotiating now currently in order to dispose these assets, in order to have more flexibility. Overall, we are also looking for within our ecosystem, some small area that maybe is not so focused in terms of growth and in terms of profitability. So we can also implement some small dismissal within our perimeter in order to give us more financial flexibility and continue to invest in higher profitable and let's say, stronger competence based or asset-based companies in order to continue to create value.

Then we have the last question. And can you give us more details on Smart Solutions pipeline you're seeing for 2025 after the investments made in 2024?

Yes. So in terms of, let's say, Smart Solutions strategy, we are focused on very vertical solutions. So our business in this kind of division is a business also strategic to support our positioning with the big customers and implement also synergies in our strategy of upsell and cross-sell. So be positioned with Smart Solution, we can also grow in terms of services across the industries because we can position ourselves in a better way than the competition. So in terms of, let's say, growth of revenues, most of our, let's say, vertical solutions are subscription-based. So the impact of the -- for us, the main impact of this kind of delivery is based on a sustainable, recurrent business. So the Smart Solution pipeline will bring us, let's say, not so strong top line growth. So we are planning around 10%, let's say, as a growth of the overall Smart Solutions division. But we will, let's say, have a substantial recurrent revenue also for the mid, long term. In terms of pipeline, let's say, the most growing one are related to Aerospace. So the best and the fast-growing is our solution for fuel optimization that we are selling to airlines. So it's a software that is scaling up by implementation towards fleets. And so when we start with a big customer, with a big fleet, of course, subscription are related to sales, so to aircraft. And so more aircraft starts to implement our solution, more recurring revenue will come for the future. So this area is fast growing. We have a good expectation also for the fintech domain, especially for the digital payments segment for which we invested preparing with, let's say, Innovative Solution also with the acquisition of minority stakes in PayDo, with Assiopay and all the, let's say, internal organization that we have focused on this kind of business. 2025 will be driven in terms of fintech growth, especially around our digital payment solution. And also for RegTech part, so our anti-money laundering software is growing in terms of recurring revenues, and there are open several, let's say, opportunities that we are addressing in order to make it grow. I hope that -- I've given some flavor, not so much, but some, okay?

Thank you very much, Daniele. And now let's go to an anonymous question this time. How much was the dilutive impact on EBITDA margin from EUR 12 million noncore sales?

Yes. So we already disclosed this that last year, we decided also for some market dynamics to accept some with the lower overall gross margin. So the EUR 12 million we delivered in 2024 were more or less at 8% of gross margin. So the calculation for the dilutive impact can be done by this. So it's EUR 12 million at 8% gross margin. I don't know Andrea, if that's something about that and do more complex calculation because you are quicker with numbers.

It's the 0.2 percentage points, I believe, the effect. So from a 12.9% if we cut from the revenues and from the, let's say, operating profit margin, it's about 0.2 percentage point the effect of this noncore. So it will be, let's say, 13.1%, 13.2% the margin.

And now we have another question from Diego Esteban on the financial year 2025 guidance. So Diego is asking, could you please give us some color on what is driving the deceleration in organic growth or revenue growth?

Yes. So it's a guidance, of course, and is related to the fact that 2024 was exceptional in terms of organic growth, also including this one-off EUR 12 million, let's say, business that we made in 2024. Overall, let's say, the size is bigger, so the growth has an impact in terms of percentage with respect to the sites. And overall, let's say, we are still looking to some industries that are fast growing, but there is uncertainty overall across the other industry segments. So especially for the industrial part that is lowering in general in terms of market segment. The telco business that was related towards telco customer and together with telco customers towards the market is also under a lot of changes. And so our guidance is quite, let's say, more comfortable also with respect to the last year that was very exceptional. And of course, the other point is that as a guidance, we are focusing all the management team, all the sales team to acquire higher value, let's say, and profitable business with respect to position on sides. So our focus will be to continue to have an offering of value creation. So high profitable and business-wise, let's say, we focus on high-value activity with respect to activities that gives us volumes. So this is more a guidance in order to focus the management to get better deals. In terms of value proposition, we expect to focus on grow less profitable business. So there is an expectation of more or less 10% of organic growth of course, if we capture more opportunity, it will be better.

Okay. Thank you, very much, Daniele. I'm going to continue with the question of -- with the questions with Diego Esteban. So does the new guidance includes the consolidation of Webgenesys and IT Values?

Let's say, if we look to the organic growth. So as a guidance, we -- they are not included because it's a new perimeter with respect to the last year. So overall, the growth of the group will be stronger, of course, in terms of consolidated revenues. In terms of, EBITDA margin guidance, we are already considering them that are improving the overall mix. So the pro forma was already 14%, by adding these 2 companies, we will have a slight improvement for IT Values and a stronger improvement also to Webgenesys to compensate also, let's say, the investment we made in 2024. So overall, as a guidance, including them, will be above 14% EBITDA margin.

Okay. Last but not least, we have the last question of Diego Esteban. And looking forward, should we expect a future medium term revenue growth of HSD?

I guess, it's high single digit.

Yes, I was asking myself what is HSD, but no, thank you, Andrea. In terms of growth, let's say, we are planning to make Capital Market Day. So we already announced this, let's say, news. We still -- we will publish this week the date. It will be held on to the last week of May, okay? And for sure, let's say, in this event, we will disclose also our mid- and long-term vision with the 3 years, let's say, disclosing our 3 years plan we are working on with also some expectation for the future. So let's see that in that date, we will be more, let's say, open to share also the mid-term view in terms of growth, in terms of profitability.

Thank you very much, Daniele.

We have some other...

Yes, we have other question -- okay, we have a question from [Andrea Bonfa]. He said, hi to everybody. Just to be sure to have understood properly the 8% organic growth, and we have 11% of LFL or 5% LFL, if we adjust for the low margin business that you want to terminate.

I guess it's like-for-like.

Andrea, I'll let you answer to Andrea Bonfa. So you shared the name. You can be protagonist in the answer.

Yes. So that's correct. So this is the 8%. It's already, let's say, after the compensation of the approximately EUR 12 million. So let's say, if we normalize, let's say, the 2024 revenues, yes, it's double digit, let's say it's a double-digit growth expected for the 2025. If you -- it's correct. So the 8% is basically after the compensation of the EUR 12 million from let's say, these telco noncore activities that we are planning to, let's say, reduce or completely end in 2025. So it will be more, let's say, 11%, that's correct.

And we have another question from [Thibault], I hope I'm pronouncing the correct way. And he says, a few questions on my side. Okay. So we have a long question here. You've done significant acquisitions end of 2024. Now the financial position is more levered. And treasury shares were disposed of, meaning you have less leeway for further M&A in the short term. Would you confirm that priority now is deleveraging the balance sheet, integrating the targets and small bolt-on M&As than do other significant deals?

Yes, [ Thibault ], I confirm. So we invested a lot last year. 2024 was, let's say, I think also historically, the strongest year in terms of aggregations, in terms of revenues, in terms of EBITDA and also complexity of the companies that joined the TXT ecosystem. Still, we are looking for good opportunities on the market to consolidate our offering and to have a complementary, let's say, assets and capabilities to add to our portfolio. The net financial position is, let's say, more levered with respect to the past for sure. We still have the opportunity to dismiss, as I said before, some assets to continue to grow there is, let's say, IT Value that we already signed. We are working on other opportunity, but 2025 probably will be lower in terms of aggregation with respect 2024. We will focus in let's say, improve the operational efficiency overall, the new acquisition that we did, and we will focus also in increment synergies and upsell and cross-sell opportunity to the existing customer base with the overall portfolio that we have aggregated.

Thank you very much, Daniele. So with [Thibault] asks, we mentioned a few times a potential CMD, any news on that?

Yes, I already said before probably. So we will announce the formal date during this week. So we have decided in our Board meeting that will be held in the last week of May. So it's confirmed. And during the week, we'll, let's say, send the information about the event and the organization of the event and the right date.

Thank you very much. Another question is from [Thibault]. Can you remind us your actual exposure to the defense sector in percentage of revenue, type of projects you work on considering what's happening in Germany?

Yes. So in terms of market, let's say, exposure, we have also communicated for the Aerospace & Defense division that is 27% to the overall total of the revenues in terms of consolidated revenues of 2024. Aerospace & Defense is including both civil aviation business and let's say, defense business. And let's say, for -- we are focused mainly on aviation in the defense business and mainly the defense programs are dual use. So we provide software for helicopters, aircrafts that runs both in military and in civil aviation. So it's not so easy to make a very sharp division between what is civil and what is defense. As you know, so there are a lot of investment also in terms of public, let's say, money spent for the defense business. We have to consider that we are positioned on long-term programs. So we are delivering our technology in order to build, let's say, future next, let's say, next generation of aircraft, next generation of helicopters. So our focus is more on the mid, long term. We have a good positioning. The improvement in terms of top line would be, let's say, not so strong with respect to the investment the government are doing in defense, also because we start with new projects and the duration of these kind of programs are mid, long term. So we are involved in the new generation of aircrafts that will be produced in Europe on the defense side. We are also involved in the new programs related to land and naval systems, of course, being an engineering company, providing software and the time line of this kind of program since long, our involvement in the programs is, let's say, on a long term. So we start and let's say, the growth will come during the next few years. For sure, we strengthen our positioning as a European supplier and especially for European program we have a boost also with respect to big competitors that are in terms of services and software that are outside from Europe. So we will capture opportunity that will come from that. And of course, our let's say, also Smart Solutions that we aggregated in the last few years are worldwide used by defense main players. And so we expect also to capture opportunity worldwide with these kind of solutions that can be delivered across borders. So I hope that I explained a little bit.

Okay. Thank you very much, Daniele.

So we don't have any more questions, Alice? So if someone wants to send the last one, we will answer. Otherwise, we are very happy to share with you this sustainability of our growth plan. So it's several years that we are growing. We are bringing value in terms of, let's say, competencies and assets toward the market. The market recognize us, as let's say, a new player that can deliver complex system and large programs, we can be a reliable partner in terms of technology for many players in the market. So we are still willing to continue to grow, to continue to create value for the next period. We would like to have you as soon as we define the date of our Capital Market Day to share directly with you more about our strategy, about our, let's say, plan for the mid and long term. So thank you very much for your time. I would like to thank Alice for the booth here with us and Andrea from Berlin.

Thank you, everyone. See you next time.

And see you next time. Thank you so much. Bye-bye.

Thank you. Bye-bye.