TXT e solutions SpA

MIL:TXT

Earnings Call Transcript 2022-Q4

[Unknown Executive]

Good morning, everybody. And as always, thank you so much for joining us this morning as we discuss the financial results of 2022. We just wait another couple of moments that allows a few people to join. And the presentation, as always, will be given by TXT Group CEO, Daniele Misani; and Investor Relations, Andrea Favini, who is joining us from [indiscernible] . So there's another couple of moments. [Operator Instructions]

So in a couple of moments, we will begin. Thank you very much for your time and your patience.

[Daniele Misani, executive]

Can I start [indiscernible] or...

[Unknown Executive]

Whenever you're ready.

[Daniele Misani, executive]

Okay. We are ready. Okay, thank you very much, everybody, for joining this presentation in which we will explain the results of 2022 that, as you know, probably from the press release of yesterday are very positive.

The main KPIs in the group. So revenues and EBITDA. Revenues consolidated are EUR 150 million in growth by 56% with respect to the previous year. The growth is driven by all the divisions of the group that do a very good job during 2022 in all, let's say, the division and all the offerings. So 59% growth of the Industrial, Aerospace & Aviation division and plus 53% into the fintech division, including the public sector. So the 2 divisions are more or less the same size.

In terms of marginality, also very good results. In terms of profitability, we keep the 15% in terms of average EBITDA margin with a growth of 53% consolidated, moving from EUR 14.5 million to EUR 22.3 million during the year, consolidated value. But if you look at the, let's say, pro forma value, the results are still stronger because we did several M&A operations during the second half of the year. The pro forma revenues are around EUR 200 million. So EUR 205 million, plus 88% with the same pro forma value in 2021, with the growth, of course, of the size of 90% related to the M&A. And the rest is driven by the growth of the company itself.

In terms of pro forma rate, the EBITDA also is a good result because we are towards the EUR 30 million, EUR 28.4 million plus 73% with respect to the same period over the last year. So stronger results, not only in the consolidated part, but also given the contribution of the companies that we acquired in the second half of the year, stronger result if we look to the performance. So to the starting point of the 2023. So we will start from these figure to address the 2023 growth.

This is not, let's say, a good year alone, but it's a part of a history that was started several years ago. So as the first phase of transformation very, let's say, deep transformation of the TXT group that now reaches some size that was not, let's say, ever reached in the past. The EUR 36 million after selling of the Retail division in 2017, growth in an organic way with let's say, a continuous year-by-year, 10% over the years. And let's say, after a few years, they doubled the size. So from 36 to 61.

And then the contribution of the M&A strategy, so the buy and build contribution that gives a boost by, let's say, aggregating revenues, but also give boost by synergies that increased the overall result bring us in a continuous and sustainable growth since the beginning of the plan. So this first phase of transformation has been completed and we start the new, let's say, 3 years in front of us, starting from a solid foundation of diversification in terms of offering and in terms of market assets and interest of technologies.

Looking to other KPIs. It was very strong also the organic growth. So like-to-like perimeter, the overall group grew by 18% above the average of the IT market in 2022. The contribution of the M&A is EUR 37 million. For the M&A mainly coming into 2022, but also someone that was closed at the end of 2021. So we did, let's say, 6 M&A activity during 2022, Ennova, SPS, DM, PGMD and TLogos, plus, we acquired a minority interest in ProSim that is a Dutch company very focused in simulation that will be consolidated starting from 2024, in which we will have an option to increase our shares within the company. Now we are investing in order to grow this kind of market in this kind of offering.

The good result is also bottom line. So the net profit consolidated this year is strong, EUR 12 million. 80% of revenues in the same size in terms of percentage also of the last year. So -- but very strong in terms of absolute value for our history.

In terms of investment, we continue to invest. So the strategy to have an offering mass solution is still a very strong value proposition to the market because position ourselves as, let's say, different from the others with a strong proprietary and vertical solutions that are enable us to address customer and upsell and process or also other services.

In terms of investment, we invested more than EUR 7 million during 2022, increasing the amount of money invested with respect to the previous year by more than 10%. The revenues coming from this software, so from this bus solution offering is EUR 10.3 million in growth with respect to the same period of the last year. EUR 10.3 million that are mostly recurring revenues. So revenues coming from subscription or software that are continuing to be maintained.

And a very strong point is also the service related to our solution that is sold together with our solution. I'm speaking about services related to data mainly. So data preparation, data quality, data integration to customers. So added value to the customer of service and added value, so high marginality and the revenues coming from this kind of services is more or less EUR 30 million, so EUR 28 million.

Strong also our presence international presence last year, total revenues coming abroad, so not in the domestic market is equal to EUR 42 million, that is EUR 28 million out of the total. And in terms of sustainable debt, we are still, let's say, we are not positive. So we are in debt, there is a net debt of EUR 38 million, not adjusted. But we have to remember that we have a financial investment in a bank that is more or less EUR 15 million that can be -- is planned to be divested during the year. And we have treasury shares, so an important amount of treasury shares, EUR 12 million that is in the presentation is the value calculated at the end of the last year, so 31 December. But if you consider also the stock price as far as today, the value is more. So we have more or less EUR 20 million in treasury shares that will be used to do further M&A. So further acquisitions during 2023 and the next years.

In terms of contributions of the core markets, as I said before, there is a strong contribution coming from every kind of offering and also the diversification of the market presence allow us to be more, let's say, less risky in order to continue to do sustainable business. The Aerospace & Defense, let's say, the historical offering that we have in the portfolio, that is 54% out of 57% of the overall amount. The industrial automotive and telco that is the remaining in. So this, let's say, Aerospace & Aviation overall division brought EUR 86 million, of which 10% organic with a strong growth year-to-year, so more or less 60%, a good marginality. So 18%. The contribution of the marginality is given by the strategic position in the fast market and is given by the good, let's say, performance also of the fintech -- of the civil aviation domain in which pays outperformed this year.

There are strong software revenues, EUR 26 million of mature product and smart solution portfolio whose contribution comes also from the new acquired DM Consulting and Teratron that is bringing smart solutions and intelligent and smart devices to customer in the automotive segment and the industrial segment. And this mostly of the international business is coming from this division, so 36%.

In terms of the fintech, that also includes the public sector offering as far as today in our, let's say, segmentation, there is a good year in terms of growth and in terms of positioning and in terms of also maturity of the smart solutions that are going to the market. So EUR 65 million consolidated, 53% year-to-year growth, and there is a strong contribution of organic growth here, 30% more or less -- 28%.

Margin is still, let's say, less because there are stronger and still investment into the product lines that are not mature. So more of the -- most of the investments are in this part of some companies that are not still, let's say, bringing good volumes for the investment, but we plan to have it in the next future. Revenues coming from software are EUR 12 billion that are 20% of the total. So it's a strong result. So the policy to invest in solution is positive also in this area. And the international business is 18% and mostly comes from the DACH region and particularly from Switzerland in which we have an offering for the banking and finance institutions.

If we look to some detail more, let's say, focus on the single segment of the market, contribution important from the public sector domain, so the government. So all the business related to public tenders, let's say, CONSOB mainly in Italy that is, let's say, the regulator that is giving this kind of contract. This part of digitalization related to the government was a driver of growth of the fintech part because we got 40% growth on the, let's say, in HSPI that is our digital advisory company operating in this segment.

And of course, because also the tenders that I explained later. One, the expectation for the future is very positive in terms of growth in this segment. Fintech domain, I said the growth also 20% organically. Also to the growth of, let's say, and the focus on the quality assurance division that brought the strong position in Assioma plus Quence that joined the group at the end of 2021.

Together, they reached better the market with strong, let's say, contracts and strong continuity. Also the contribution of the new acquired Novigo, LBA is positive in terms of the overall growth of this market segment in the fintech domain.

Variation is good because there is a reprice. So the market is repricing and also our positioning is benefiting. There is a benefit of the reprice of the market because pace is very well positioned. We closed some deals for the sustainability. So for the fuel optimization and after the slowdown of the COVID outbreak, we have a positive trend confirmed also for the next year.

The defense segment is our, let's say, bread and butter, let's say, because we are very strongly positioned. We were also awarded by Leonardo that is of our main customer in this segment a few weeks ago as one of the top supplier so for the service excellence. And this segment is strong and is expected to grow and remain strong for the next few years.

Industrial automotive that is a market in which there is more also pressure about the performances of the overall market. Still for us in terms of digitalization of processes and positioning of intelligent and smart solution, it was, let's say, still a positive contribution for our overall results because we recorded an organic double-digit growth also in this segment, driven also by the international business from Teratron and also for the contribution of the, let's say, services and platform provided by fintech and DM Consulting.

We added also to the overall portfolio the presence in the tech domain, thanks to the acquisition of Ennova and SPS and also in this segment, we are starting to position ourselves. So the overall picture of the group has changed because we diversify in terms of market risk, in terms of technology that we can offer to the market.

The guidance that we are planning for 2023. So the outlook is positive, and we are working in order to keep, let's say, an average EBITDA margin better than 14%. So the 15% that we reached this year is a target to be reached also the next year. So a sustainable business. We do -- we did a lot of, let's say, efficiency also in the general services cost structure in order to serve more company with the same amount of general services costs. So we are doing synergies in terms of cost among the ecosystem of our companies in order to continue to keep a good EBITDA margin around more than 14%.

In terms of revenue, we plan to grow. So we start from a pro forma of 200 million and we are targeting more than EUR 250 million, partially will be given by the organic. So we are planning to grow -- to continue to grow in double digit organically. Plus we will continue to acquire. Of course, we are now in a debt position. But as I said before, we have treasury shares, so that today are more or less EUR 20 million plus this investment from some financial investments that we did. So we have capability plus -- to continue to, let's say, acquire plus we have the cash generation, the cash conversion, that is a good cash conversion for us. So we are starting from a pro forma EUR 30 million in EBITDA.

So if we increase our volumes next year, it will be more. And so there is the cash conversion plus financial, plus the treasury shares, plus some credit line that we will open to the market. So we plan to continue to invest also by using the leverage. So our target is not to exceed 2x the EBITDA for the acquisition, of course, the acquisition will depend on the opportunity, on the market. And our strategy is to continue to aggregate excellency, strengthen the position in the market in which we are and strengthen the capabilities to the technology.

So we invested in order to strengthen ourselves in the offering in cybersecurity. We strengthened our offering in IoT, in artificial intelligence. So we want to continue to invest in technology in order to have better assets to the market and to continue to upsell and cross-sell our solutions.

Some, let's say, focus on the events that happened after the last call that we had 3 months ago or more or less. So 2 are related to some extraordinary operation that we did end of last year. So it's not after the closing of the, let's say, the year, but it was during 2022, but it was not yet explained to you. And so I want to give you the strategic, let's say, outlook for the acquisition that we did in end of November and in December 2022.

First of all, was PGMD that is a consulting company. The strategic value of this acquisition was to strengthen the digital advisory say, divisions to offer more capability into the digitalization of processes of a larger customer and also public sector customer. And the main point for the acquisition was to enter into the health care segment that is both public and private here in Italy with a company that is long-lasting experience on the market, a strong management team with a good track record of big projects for digitalization of ICP processes in the health care. The company is small or, let's say, relatively small EUR 2.6 million in 2022 with a margin of 20%. So good marginality.

Of course, the strategic value is to boost this capability within the overall digital advisory division of TXT, to other also services related to software engineering division that can help the let's say, offering for the health care in digitalization of processes to grow faster during 2023. The other positive, let's say, point in the acquisition is also to acquire the backlog of orders that is already -- was already of EUR 3 million order backlog when we closed the deal and now is increasing, in order to give a solid perspective of growth for the next few years in this segment. We started to consolidate this company starting off from half of November last year.

The other, let's say, small boutique that we acquired in order to improve our competence in cybersecurity, mainly is TLogos. That is also a historical, let's say, boutique present on the market since more than 10 years. This strategic transaction done in order to acquire competencies around cybersecurity. So we acquired a team of experts recognized by the market with also stronger, let's say, footprint into the space domain. So that is near to our aerospace division itself. So we are strengthening both the capability of cybersecurity within a domain at this space. That is a domain that is in range of our offering as far as today.

TLogos in 2022 had revenues of EUR 1.7 million with a very, very strong EBITDA margin because the value proposition is high level consultancy in digital transformation and in cybersecurity. So it's a high professional, 35% of EBITDA margin in average. Also, this company has a significant backlog for the next few years. And together with the digital adviser through HSPI, PGMD and TLogos together in the digital advisory division of TXT, it will be a driver of growth for the 2023-2025 business plan. TLogos was started to be consolidated in December 2022.

The other main events that happened last month, last week, I think maybe it is week, I remember that we did -- it's a long time that we are working on it. So for me, it's a history, but for the people around and for the investor is news. We finally signed a very important contract HSPI through NRT or a group of companies as, let's say, head of this RTI acquired and signed a contract to provide digital, let's say, digital consultancy to the public sector. So it was a very important let's say, contract because we position ourselves in a very strong position on the market. We will provide application services and a cloud perspective. We -- it's part of the national recovery this plan.

The total value of this contract is very important, EUR 120 million in 4 years, okay, more or less, of which 61% are secured to the head of the RTI, so to the TXT Group to HSPI and the synergy that we put in place. This will be a driver of growth. So we are planning this, let's say, delivery also since last year. So we are investing the reason also for some, let's say, less marginality in the public sector and Fintech division that I showed before because we invested in hiring people, training people, and we want to address this opportunity very strongly. So this is part of our long-term strategic plan to position ourselves in this segment. And this contract is, let's say, the first step of growth in this area that we are planning and we want to do. It's a key milestone for the accelerated growth in a strategic field that we are, let's say, focusing since few years.

In terms also another minor, let's say, investment that we did in January was related to ESMA solution. So we invested in another company, in a small, let's say, start-up that is LasLab. The strategic, let's say, the strategic reason of this investment was related to the market target of this kind of solution is a software company selling the software to the consumer credit.

We entered in minority shares with the expectation to be, let's say, the software provider, so the technological provider of the company and build the solution and commercialize the solution to the market. These are the main events.

So now I will have Andrea Favini that will go deep a little bit in the financial details. Thank you very much.

[Andrea Favini, executive]

Thank you, Daniele, and welcome, ladies and gentlemen, to the financial section of this conference call.

Starting from the profit and loss of the year. 2022 shows a revenue of EUR 150.8 million, up 56.4% compared to 2022. And on a like-to-like basis, the revenue grew by 18% and the M&A contributed by approximately EUR 37 million.

If we look at the gross margin, the gross margin grew by 43.5% in 2022. And the gross margin as a percentage of revenues declined by 2.4 percentage points in 2022. And this is mainly related to the different business model acquired and consolidated in 2021 and 2022 that are mainly company with an offering in the digital advisory and the software engineering field with a higher incidence of direct cost against the indirect cost namely R&D and the commercial cost.

In fact, if we look at the R&D cost, the investment in 2022 grew at a lower rate compared to the revenues. In fact, we recorded a growth of 10 -- of 11% approximately compared to 2021. And those investments are fully for the benefit of our smart solution offering. And investment, it's almost fully organic investment in terms of company that were already in our perimeter in 2021.

If we look at the commercial cost, the growth in 2022 is significant, up 45%. And the growth is mainly -- and the investments are mainly incurred to accelerate the growth of all the divisions. But if we look at the commercial costs as a percentage of revenues, this slightly decreased by 0.5 percentage point compared to the previous year.

If you look at the general and administrative costs, those remain quite stable in terms of incidence on revenues. In fact, in 2022, general and administrative costs were equal to 8.2% of revenues, slightly up compared to the 8.5% recorded in 2021. EBITDA amounted to EUR 22.3 million as already disclosed by Daniele, and it's up 53.3% compared to 2021.

And let's say, the general -- let's say, that the EBITDA margin decreased by 0.3 percentage points, and this is mainly related to the consolidation beginning in the fourth quarter of 2022 of the service company of Ennova SpA with a lower EBITDA margin than the TXT Group average and due to the particularly positive performance of the TXT Group in the fourth quarter of 2021.

If we look at the amortization and depreciation, depreciation grew by 48%, slightly lower compared to the growth of revenues in the same period and the growth is to be attributed to the merger and acquisition accomplished in 2021 and in 2022. And also the amortization of intangibles grew by 64.8%, a higher rate compared to the depreciation because amortization also includes the part of goodwill that has been allocated to other intangibles like customer relationships. So of course, there is, let's say, a higher increase in amortization coming from M&A compared to depreciation itself due to the effect of goodwill allocated through PPA, Purchase Price Allocation.

If we look at the organization and nonrecurring cost, it was of EUR 1.3 million, of which EUR 0.2 million related to accrual to bad debt provision. There are EUR 0.1 million of reorganization costs and the remaining of EUR 1 million is nearly nonrecurring costs mainly related to write-offs of good wills and other minor losses.

If we look at the financial result of the period in 2022, we had a positive balance of EUR 2.3 million compared to the EUR 0.7 million in 2021, and the increase was mainly attributable to the adjustment of the fair value of the assets amounting to EUR 2.4 million relating to the earnout of Assioma and the Put/Call option for the purchase of the remaining 40% of TXT Working Capital Solutions.

In particular, for Assioma, the amount recorded fair value for EUR 2.6 million as of September 20, 2022, was adjusted to EUR 1.5 million based on an agreement between the parties. And for the TXT Working Capital Solutions, the amount recorded for EUR 2.8 million was adjusted to EUR 1.6 million based on the expected financial and economic results in the 2024 of TXT Working Capital Solutions itself.

Financial income also includes EUR 2.2 million from the fair-value measurement of the investment in Banca del Fucino and the share of the results of nonconsolidated companies namely Re-versal, the ProSim Training Solutions and Ennova for the period in which the results have not been consolidated in our, let's say, the group, meaning mainly the fourth quarter of 2022.

Tax rates in 2022 was approximately 26%, in line with the 2021 tax rate. And if we look at the net profit, we recorded significant growth from EUR 7.8 million in 2021, up 52.9% to EUR 12 million in 2022. And the net profit margin is of 8%, and it's in line compared to the 2021.

If we look to the fourth quarter of the year, the results are really positive and the revenues are EUR 58.4 million, up 97% of -- compared to the fourth quarter of 2021. And the main impact is coming, of course, from M&A. In fact, we have let's say, a EUR 4.5 million of organic growth and the remaining is a contribution coming from the acquisition. The direct cost grew at a higher rate for the same reason explained for the full year results and the new consolidated company, for example, Ennova. It's the incidence of direct cost is, of course, higher compared to the other smart solution companies that we have in our consolidation parameter.

In terms of EBITDA of the period in the fourth quarter, we reported a 15% EBITDA margin down compared to the 19.4% EBITDA margin of fourth quarter of 2021. And let's say, the 2022 fourth quarter results are more in line with the average target of the company, while in the fourth quarter of 2021, we recorded some extraordinary let's say, profit coming mainly from multiyear projects.

Of course, the incidence of depreciation includes the whole effect of the company's consolidated in the period and the reorganization nonrecurring costs are those discussed for the full year results as well as the financial -- net financial income. In terms of net profit, the net profit of the fourth quarter of 2022 was EUR 6.7 million equal to 11.4% of revenues of the period.

If you move to the net financial debt, the consolidated net financial debt unadjusted, and next slide, please. The, let's say, unadjusted consolidated and financial debt is of December 31, 2022, was positive for EUR 38.3 million with an increase of EUR 26.6 million compared to the negative balance of EUR 11.6 million as of December 2021. The increase is mainly attributable to the effect of the acquisition, net of the acquired financial debt for EUR 19.4 million. The purchase of treasury share for 5.5 million and the effect of the increase in the net working capital of EUR 12.6 million, which is expected to decrease in the first half of 2023.

The net financial position -- the net financial debt includes EUR 8.5 million of debt referred to IFRS 16, up EUR 2.7 million compared to EUR 5.7 million as of December 31, 2021, and are also included EUR 11 million of debt for Earn-out and Put/Call option for the purchase of minority interest, of which EUR 6.7 million beyond the 12 months.

If we look at in the details of the unadjusted net debt position as of 31st December 2022, cash and cash equivalents for EUR 33 million mainly consists of let's say, bank accounts had in major Italian banks. And if we look at the financial instrument at fair value for EUR 49 million, those are mainly related to investment in multisegment insurance with a partially guaranteed capital and the bond loan and government securities with an average -- with an overall medium low risk profile.

If we look at the current financial debt as of December 31, 2022, which is equal to the EUR 52 million, it includes mainly EUR 44 million for the current portion of noncurrent financial debt and the short-term loans of money. And also include EUR 4.3 million, as I estimated disbursement for the first Earn-outs and EUR 2.5 million for the short-term period of the debt for rental and lease following the adoption of the accounting standard IFRS 16.

The short-term financial resources are equal to EUR 30.3 million as of December 31, 2022, down EUR 7.5 million compared to the net financial resources as of December 31, 2021. If we look at the current net financial debt, which is equal to EUR 69 million as of December 31, 2022, it related to EUR 57 million to the portion of medium to long-term loss and with the maturity over 12 months. Then we have EUR 7 million for the estimated fair value of the debt for Put/Call option and are also linked to the acquisitions. And there are EUR 6 million for the medium and long-term portion of the debt for the payment of rental lease office accounted for according to IFRS 16.

If we look at the consolidated adjusted net financial position as of December 31, 2022, it is positive, so a net debt of EUR 20 million, up EUR 18.3 million compared to the consolidated net financial position and adjusted as of December 31, 2022. And the difference of EUR 18.3 million is mainly consisting to the reclassification of the TXT Group investment in main bank, accounted for within fixed assets in the financial statement and adjusted within the financial asset in the adjusted financial position and are also included the share still to be transferred in the context of the M&A operation concluded in the November and December of 2022.

So the adjusted net debt position, it's equal to EUR 20 million as of December 31, 202,2, and it's down EUR 28 million approximately compared to the adjusted net debt position as of end of 2021.

If we look at the balance sheet, as of 31st December 2022, intangible asset grew by EUR 22.8 million and the growth is mainly related to the goodwill accounted for in the period. In fact, the goodwill increased from EUR 44.6 million end of 2021 to EUR 63.5 million end of 2022. So we can say that the growth is mainly driven by acquisition. Does by the increase in good will. Tangible assets increased at lower less rate, EUR 6 million compared to 2021 and a record to EUR 18.3 million as of end of 2022.

In the other fixed assets, it's included in the stake in Banca del Fucino which also recorded an adjustment in its fair value and is the main, let's say, driver in the change occurring the other fixed assets. So total fixed asset are up to EUR 115 million, up EUR 22 million compared to the 2021.

If we look at the net working capital as of the December 31, 2022, it is equal to approximately EUR 37 million, up approximately EUR 13 million compared to the end of 2021. And the growth is, of course, explained also by the fact that there is the full -- there are the full, let's say, assets and liabilities of the new acquired companies, while, of course, the profit and loss consolidated pro rata part of the economic results of the period.

Nevertheless, of course, the group expect reduction in the net working capital during the first, let's say, half of 2023 due to a temporary growth of receivables which is, let's say, more or less a standard for TXT Group. The severance and other noncurrent liabilities grew by EUR 1.5 million, mainly for the acquisition. And of course, we also recorded a significant growth in the shareholders' equity, driven by the net profit and the effect of the treasury shares, the sales and the repurchase of treasury shares.

If we move to the next slide, the shareholder structure as of December 31, 2022, shows larger line, the vehicle of the TXT chairman, Enrico Magni, owning a stake of 30%. Then there are the managers of the group holding a stake of 16%, and those are mainly coming from, let's say, the M&A operation, in which TXT paid part of the consideration by using treasury shares.

Then there is the market running 43%, a new investor L.V.O Global Asset Management SA owning 3%. And then we have treasury shares that accounting for the 7% of the capital of TXT. And the number of treasury share as of December 31, 2022, are 906,600. Market data shows as of December 31, 2022, price per share of EUR 12.84 and a market cap of EUR 155 million. And based on historical net profit results achieved and the sustainability of the business, which is sufficient to generate cash to finance the group ambitious growth plan together with medium, longer-term financing. The Board proposed to the shareholder meeting the distribution of a dividend of EUR 0.18 per share. For each of the outstanding shares, excluding treasury share with payments starting on 24 May 2023, a record date of May 2023 and ex dividend date 22nd of May 2023.

The total dividend will be approximately EUR 2.2 million and with a dividend yield of 1.4% calculating on the spot price as of December 31, 2022. If we look at the graph for dividend and treasury share repurchase. In 2022, the group did not pay any dividend. So EUR 5.5 million or, let's say, invested in the repurchase of treasury shares that has been mainly used for the M&A plan that is still ongoing.

So we are done for the financial section of this conference call. Now I'll let Daniele and [ Bridgette ] go through the Q&A. And thank you so much for your attention, and see you on the next time. Thank you again.

[Unknown Executive]

I'm on mute sorry. Thank you very much, Andrea. And like you said, we will now begin the short Q&A session. Even though today, we've got quite a few questions. So I'll go on one by one, Daniele, if you agree.

[Daniele Misani, executive]

Yes.

[Unknown Executive]

Yes. So our first question came from [ Paul Finan ], who said that our ability to grow organically and by acquisition and synergistically is impressive. How far do you think you can go with the strategy?

[Daniele Misani, executive]

Okay. So we thank you, Paul, for the consideration. So we did this plan starting let's say, the plan starting 2000 -- after the selling of retail 2018. But of course, it started to go on a ramp-up phase in the last 3 years, starting for 2020. Results as very positive, this is our strategy to continue to aggregate, let's say, excellency in an ecosystem, leverage on synergies and synergies that are commercial synergies, of course, in order to upsell and cross-sell different offering to customer, large customer, mostly to do synergies in terms of technological capability.

So we have a center of excellence in different technological, let's say, fields like cybersecurity, artificial intelligence, IoT, extended reality that we are pushing, and we are using as ups in order to serve all the company of the ecosystem. And this strategy is fundamental to be continued in the next 3 years plan. So we are planning a 3-year plan starting from 2023 to continue with this approach in which we leverage synergies among the ecosystem. And we add companies in order to diversify the offering and reach more market segments.

So we have planned to continue at least for 3 years before doing any other kind of consideration. So the plan continues. Of course, the performances are still let's say, a question mark, of course. So the track record is positive. We are very committed to continue on this road, and we are planning and we want to achieve the same result we did in the last few years, also in a time span of 3 more years at least.

[Unknown Executive]

And the second question is [ Andrea Bonfa Acosta ] I hope I pronounced that correctly. He calculated EUR 120 million of new public administration orders over 2023 to 2026. Is this correct? And if yes, how is the workload of those orders? Is it homogenous per year or front loaded or backloaded? Are we counting any more orders?

[Daniele Misani, executive]

Yes. So let's say, the estimation given by Andrea is quite correct. There's a sum up of, let's say, of previously acquired with respect to the big, let's say, 61% of EUR 120 million, order bookings is something in the order of EUR 120 million. So summing up also the previous one already acquired plus the ones that we inherited from the company we acquired in the last month of 2022. And speaking about PGMD that is working for the health care segment in the public administration segment.

So EUR 120 million that will be, let's say, is a maximum amount to be achieved during the 4 years. So there is still a delivery incapacity, let's say, plan in order to meet the overall amount. There is an expectation to add more orders because we are still working on tenders. So there is the opportunity to increase the order booking also in these directions. And of course, the -- let's say, the revenue booking with respect to these orders is not homogeneous because in general, this is a big and large project, has a ramp-up phase in which we start to work, but let's say, the -- we think to start to have a homogeneous workload in the half of the period.

So first year is a ramp-up, then there is a platform -- plateau. Platform, platform is better than plateau. And then there is at the end when the project is closing a little bit slow down. So it's not homogeneous. So the most revenue impact will come starting not 2023, but 2024, okay, of this amount of money.

[Unknown Executive]

Okay. And Andrea also sent us another question, yes. So have the investment of the annualized sales that your 2023 M&A margin rate.

[Daniele Misani, executive]

So the contribution of M&A, I understand, in 2023. So as the slide, let's say, telling the governance model for 2023, so we have, let's say, confirmed to -- that we are planning to reach an overall revenue consolidated in 2023 more than EUR 250 million. This is given by the contribution, of course, of organic growth and we are planning to continue in double digits. So starting from EUR 200 million means EUR 220 million, at least if we have 10% growth. And so the remaining is the contribution coming expected from the M&A consolidated.

Of course, when we are speaking about M&A, there is also the timing of the M&A that can have an impact on the consolidated results because if we close in the second half of the year, it will be difficult to have strong consolidation. But we are still planning to do, let's say, extraordinary operation in the right time in order to consolidate more than EUR 250 million.

So I know that I give a political answer and not so clear, but let's say, the main number is EUR 250 million more as revenues of 2023, with the mix of organic plus M&A.

[Unknown Executive]

Okay. Thank you. So in advance of this call this morning, we received also a couple of questions from [ Massimo Verdi ]. I hope I pronounced your name correctly. And your first question, I think I could continue on from the last question we had. So in particular, he would like to know if the M&A strategy will continue 2023? Or would it be a year of consolidation, considering that there's a reduction in cash in light of the net financial net -- net financial not being that -- I'm also translating in the meantime so that's why.

[Daniele Misani, executive]

Too many technical and financial statements.

[Unknown Executive]

Yes.

[Daniele Misani, executive]

No, I understood the question. So but it was already answered during the presentation. So we will continue with the M&A plan. So our strategy is to continue with the plan that we are already implementing also in the next 3 years' phase. We are -- we know that we use cash and so on, but we are in -- we can assess to credit, so we can do leverage in order to have, let's say, a net financial position, as I said during the governance targets that I put in the presentation to reach at maximum 2x the EBITDA in terms of, let's say, net financial position.

So we have space in order to continue to do M&A and to continue to invest in order to grow, and we will do it.

[Unknown Executive]

Another one of his questions. Another question from Massimo was, he would like to know if -- the investment in Banca del Fucino will definitely be sold in during this year? Or is the hope that there will be -- that IPO will come before 2024?

[Daniele Misani, executive]

The IPO, I think, I mean, the IPO of the bank probably.

[Unknown Executive]

Probably, yes.

[Daniele Misani, executive]

There is a plan to do the IPO of the bank. Of course, it's not under our control. So it's also a matter of the, let's say, I think the situation in the market that, in some cases, not let's say, good in order to do such kind of operations. So we are monitoring the possibility that this IPO will happen.

But still, we are planning and we are moving in order to -- this means the investment also not through the IPO, but through another investor that was to acquire the shares. So we are moving in this direction because we plan to get this, let's say, benefit from investment in order to continue our M&A operations.

[Unknown Executive]

Another question once again Massimo was if the...

[Daniele Misani, executive]

So Massimo has a lot of questions.

[Unknown Executive]

Yes, he got 5 in total. So this is the third question. So is the majority control of ProSim TS probable for 2023 or more than likely not before 2024.

[Daniele Misani, executive]

ProSim. Okay. So the acquisition of ProSim was more an investment to do a boost of a company that was in a stable position, but small -- so the decision for us was to invest putting a capital increase in order to develop new products. In particular, there is a trend for the civil aviation training in which there is a shortage of pilots now. And so there is a lot of need of training and training device.

The authorities are changing their regulations. And so there is, let's say, a strong input from technology that can help the training of pilots by using let's say, new extended reality solution, virtual reality solutions and so on. So we decided to invest in ProSim in order to have an access to the market because they are already present, but to invest in the platform and 2023 is a year in which we will continue to invest.

Our, let's say, option in order to acquire the majority. So we start to consolidate in 2024 because '23 will be, let's say, at least the first half, development phase of the new products start to be addressed to the market in the second half of the year. And so we start to consolidate hopefully according to the plan when the company start to earn money. So it will be a positive impact in our, let's say, financial plan.

So good as I asked for -- okay, another one.

[Unknown Executive]

So the second last question. And what about the Re-versal? Is it closed? Or are we still completing the constitution? And when or do you know when it will be operational?

[Daniele Misani, executive]

For Re-versal, yes. For Re-versal, we didn't put too many information out because there is still into the incubation phase, let's say. We started to start up the company, doing some investment, but it's not yet mature in order to communicate outside.

We are, let's say, in a good track phase. So we have some cost as far as today, it is not consolidated, but it's aggregated into the net profit. So before the net profit in terms of contribution of nonconsolidated companies, there are costs in the company because we are bootstrapping the overall structure. And the plan that we will start to communicate as soon as we start to commercialize offering during the second half of this year. So and will be provided more information about Re-versal during the second half of this year.

[Unknown Executive]

Okay. And the fifth and final question from Massimo is about and SPS and Polaris. So that we're promoting it a lot, but there's no contracts apart from the one that are [indiscernible] Is the market not interested? Or are there too many competitors?

[Daniele Misani, executive]

Let's say, Polaris is the platform that address the market in a unique way with respects to the competition. So there is, let's say, an establishment of let's say, services related to factoring in general that are already well established and in use by many companies. So the new approach provided by the marketplace of Polaris is still something new. And it takes time in order to ramp up. So we are suffering some slowdown because it's, let's say, lower than what we forecasted during the planning of this company to reach the targets and bring them to the marketplace and start to generate value within the marketplace.

The offer is being based on the marketplace, you need people inside the marketplace in order to do business. And this acquisition of players in the marketplace is lower than we expected. We are moving to power up this offering. We are discussing with a possible partner that will enter with an additional approach to insurance to put an insurance on the credit that will be an added value to the market, so a new feature in order to attract more players to enter.

And so we are still investing and planning this year to have a, let's say, the benefit that we planned in the near past, but with a delay with respect to the expectation. We are in delay, let's say, of 1 year with the rest to the initial expectations. And this brought also a valuation of the, let's say, of the asset of the goodwill itself because we had a put and call on this topic with the founder that, of course, will not be reached because the plan delayed.

You understood or not so much?

[Unknown Executive]

No, okay.

[Daniele Misani, executive]

Okay. There are other questions coming from the chat?

[Unknown Executive]

We have 2 anonymous questions. So the first question is, are we planning an Investor Day during the year?

[Daniele Misani, executive]

Yes. As I already also discussed, we planned to do this Investor Day in the past, but the situation on the market was quite complex. Now there is, let's say, a little discontinuity with respect to the overall trend because let's say, the Board of Directors with the approval of the results ended the 3-year period. So a new one will be renewed after the shareholder meeting in April. So it will be done during the second -- second quarter or the second half of the year after summer, but we are planning to show to the market the overall plan for the next 3 years.

Other questions?

[Unknown Executive]

And the last question, not anonymous question.

[Daniele Misani, executive]

So there are lots of anonymous questions? Not free people.

[Unknown Executive]

But thank you very much for your questions, whoever you are. So the last question is, is it EBITDA marginal recorded by -- now what is the EBITDA margin recorded by Ennova in 2022? And what are your expectations for 2023?

[Daniele Misani, executive]

Okay? So let's say, Ennova is a service business mainly like the other service business, the average, let's say, target that we put for service business is around 10% to 13%, let's say, as a target expected also for the next year. And this year, it was closed on the, let's say, same kind of order of order of magnitude. So we are speaking about 12%, something like that.

Of course, we consolidated just 1 quarter. So when you close the profit and loss during the year is never an average because it's a little bit to understand the overall performance. But let's say, the overall performance of the company of the 2022 was around 12% in EBITDA margin.

[Unknown Executive]

Thank you very much, Daniele, for your time. And I believe those are all of the questions that we have received so far. If you have any more questions, please write them to Andrea at iortxt.com, and I'm sure he'll get back to you.

[Daniele Misani, executive]

Thank you, everybody. Thank you, Andrea. And see you the next result...

[Unknown Executive]

3 months.

[Daniele Misani, executive]

3 months. Thank you very much.

[Unknown Executive]

Thank you.

[Daniele Misani, executive]

Bye-bye.