Nexi — Investor Presentation 2020

Nov 11, 2020

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nexi

9M 2020 Results Presentation

November 11th , 2020

Disclaimer

• This Presentation may contain written and oral "forward-looking statements", which includes all statements that do not relate solely to historical or current facts and which are therefore inherently uncertain. All forward-looking statements rely on a number of assumptions, expectations, projections and provisional data concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the control of Nexi Group (the "Company"). There are a variety of factors that may cause actual results and performance to be materially different from the explicit or implicit contents of any forward-looking statements and thus, such forward-looking statements are not a reliable indicator of future performance. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. The information and opinions contained in this Presentation are provided as at the date hereof and are subject to change without notice. Neither this Presentation nor any part of it nor the fact of its distribution may form the basis of, or be relied on or in connection with, any contract or investment decision.
• The information, statements and opinions contained in this Presentation are for information purposes only and do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to purchase or subscribe for securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. None of the securities referred to herein have been, or will be, registered under the U.S. Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction of the United States or in Australia, Canada or Japan or any other jurisdiction where such an offer or solicitation would be unlawful (the "Other Countries"), and there will be no public offer of any such securities in the United States. This Presentation does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or the Other Countries.
• Pursuant the consolidated law on financial intermediation of 24 February 1998 (article 154-bis, paragraph 2) Enrico Marchini, in his capacity as manager responsible for the preparation of the Company's financial reports declares that the accounting information contained in this Presentation reflects Nexi Group's documented results, financial accounts and accounting records.
• Neither the Company nor any of its representatives, directors or employees accept any liability whatsoever in connection with this Presentation or any of its contents or in relation to any loss arising from its use or from any reliance placed upon it.
• This Presentation has been prepared on a voluntary basis since the financial disclosure additional to the half-year and annual ones is no longer compulsory pursuant to law 25/2016 in application of Directive 2013/50/EU. Nexi Group is therefore not bound to prepare similar presentations in the future, unless where provided by law. Neither the Company nor any of its representatives, directors or employees accept any liability whatsoever in connection with this Presentation or any of its contents or in relation to any loss arising from its use or from any reliance placed upon it.

Executive Summary

Covid-19 update

• Overall acquiring volumes rapidly recovered across all categories on the back of improving Covid-19 situation, with acceleration in August. Acquiring volumes on Italian cards back to pre-Covid growth level, while Travel/tourism and International travelers contribution still behind last year
• Transaction volumes (acquiring + issuing) at 118 €B, -4.1% y/y, in 3Q20 and 304 €B, -12.4% y/y, in 9M20 from ~-50% during the peak of the health emergency
• From October first signs of a progressive slowdown in volumes due to Covid-19 second wave and related progressive restrictions in the Country. Compared to last Spring:
  • o Regions segmented in three risk tiers based on Covid-19 situation, reviewed periodically
  • o Most affected Regions subject to soft lockdown measures from November 6 th for at least 15 days
  • o More selective lockdown: industrial production and B2B activities open, only selected retail businesses closed
• Following Covid-19 second wave, Acquiring volumes in the last week rolling (29thOctober-4 th November) at -8% y/y¹ driven by high impact consumption category performance (e.g. travel/tourism related sectors and restaurants)
• Overall E-commerce strong acceleration in 2020 net of high impact consumption sectors: +35% y/y in 9M20 and +35% y/y in 3Q20¹
• Continued signs of acceleration from cash to digital transactions

Executive Summary

Results highlights

• EBITDA at 167.0 €M, +7.0% y/y in 3Q20. EBITDA at 428.9 €M, +0.4% y/y in 9M20
• Revenues at 276.0 €M, +1.0% y/y in 3Q20. Revenues at 753.6 €M, -3.6% y/y in 9M20

Key business update

• Merchant Services & Solutions (52% of Revenues): continued growth of POS installations and acceleration in mPOS demand, step up on e-commerce gateway activations despite shops reopening
• Cards and Digital Payments (37% of Revenues): accelerated banks interest on International Debit, continued evolution on National Debit digital capabilities and increased incidence of mobile payments and c-less transactions
• Digital Banking Solutions (11% of Revenues): continued extension of Nexi Open ecosystem, banks go-to-market progressing; continued roll out of new higher value advanced self banking and digital corporate banking solutions
• Costs -8.4% y/y in 9M20 thanks to the 100+ €M cash cost containment plan well in execution and the continued focus on efficiency
• 9M20 Net financial Debt/EBITDA down at 3.7x

SIA transaction update

• Finalizing transaction documentation and confirmatory due diligence ongoing with signing of binding documentation expected over the next two months and closing in Q3 2021
• EBITDA at 81.1 €M, +8.3% y/y in 3Q20. EBITDA at 194.9 €M, -0.7% y/y in 9M20 thanks to a resilient business model, the focus on operating cost efficiency and the increasing transaction volumes in Cards&Merchant Solutions and Digital Payment Solutions divisions
• Revenues at 189.9 €M, +2.3% y/y in 3Q20. Revenues at 525.8 €M, +0.5% y/y in 9M20

Transaction volumes rapidly recovery and back to growth in August. Signals of slow down following Covid-19 second wave and restrictions

Acquiring volumes recovery driven by Italian Cards back to pre-Covid growth in Q3. Foreign Cards slower recovery before second wave new slowdown

Acquiring volumes – Italian Cards vs Foreign Cards – Y/Y trend

Rapid recovery across categories from May after the easing of lockdown measures and accelerating in August. Slow down following recent restrictions

Acquiring volumes by category1	Product category	% change Y/Y
		Jan + Feb	March	April	May	June	July	August	Sept	2 LWR
	Basic consumption	15%	13%	11%	13%	14%	12%	13%	14%	28% +30%
44% for 37% for E-commerce	of which Physical	15%	12%	9%	12%	11%	10%	12%	13%	27%
E-commerce	of which E-commerce	27%	31%	42%	29%	55%	44%	32%	30%	45%
31% 35%	Generic/discretionary consumption	6%	-62%	-77%	-33%	-11%	-13%	-1%	-5%	-14% -6%
	of which Physical	5%	-65%	-81%	-37%	-13%	-14%	-2%	-6%	-16%
	of which E-commerce	25%	8%	47%	47%	51%	32%	36%	33%	39%
34% 19% for E-commerce	High-impact consumption	10%	-68%	-89%	-70%	-46%	-29%	-13%	-22%	-41% -50%
	of which Physical	10%	-67%	-89%	-69%	-46%	-29%	-12%	-20%	-47%
	of which E-commerce	10%	-75%	-90%	-81%	-42%	-22%	-32%	-48%	-76%
	Total	11%	-35%	-48%	-27%	-14%	-10%	-1%	-3%	0% -8%
	of which Physical	10%	-36%	-50%	-28%	-15%	-12%	-1%	-4%	-8%
Basic consumption Groceries, medical retail, utilities and services	of which E-commerce	19%	-21%	-17%	-14%	7%	11%	2%	-2%	-9%
(e.g. insurance, bank services)									% change	Y/Y on Italian Cards

Generic/discretionary consumption

Clothing, household, other non-alimentary retail and other services (e.g. laundries, beauty)

High-impact consumption

Hotels and restaurants, travel and transports, entertainment, etc.

2020 Acquiring volumes: split between Physical and E-commerce

	Jan + Feb	March	April	May	June	July	August	Sept	2 LWR
Physical	93%	92%	90%	92%	92%	93%	95%	94%	93%
E-commerce	7%	8%	10%	8%	8%	7%	5%	6%	7%

Rapid recovery across categories from May after the easing of lockdown measures and accelerating in August. Slow down following recent restrictions

9M Business update: commercial activities back to pre- Covid levels. Preparation ongoing to support Government 'cashless promotion' initiatives

Merchant Services & Solutions Cards & Digital Payments Digital Banking Solutions

• Continued growth of POS installations (+10% y/y after spring lockdown)
• Further acceleration in mPOS demand for small/micro merchants
• Continued strong demand on E-commerce despite shops reopening

• Nexi Business app with over 50% penetration on enabled merchants (active users +60% y/y in 3Q 2020)

• Accelerated bank interest on International Debit as a mass market ecommerce-enabled product

• Continued evolution on National Debit digital capabilities; Next generation platform tender ongoing
• Accelerated pipeline of digital onboarding/digital issuing projects for banks

• Step up in mobile payments transaction volumes (~+190% 3Q20 vs 3Q19) and progressive increase in c-less transactions incidence (from 38% pre lockdown to 45% in October)

• Progress on advanced ATMs. Adoption of new ATM front-end by Nexi clients completed

• Continued growth of Digital Corporate Banking installed workstations. Rollout of the new platform completed.
• Instant Payments progress continuing, with further players adopting Nexi platform
• New relevant players adopted CBI Globe open banking TPP gateway. Continued extension of Nexi Open ecosystem, banks go-to-market progressing

Preparation ongoing to support Government 'cashless promotion' initiatives

• Cashback bonus for consumers from Dec 1st 2020: 10% cashback of in-store transactions. Entry gate 50 transactions every 6 months. Each transaction eligible up to 150€. Special bonuses for consumers with the highest number of transactions In place for 2 years: 1.75bn Dec 2020-2021 and 3bn in 2022 to finance the mechanism.
• Lottery on receipts from Jan 1st 2021: Prize draw for consumers: 45 €M for electronic payments. In place for 2 years

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Focus on 9M20 Results

2019 and 2020 data include ISP merchant book acquisition

Net Revenues back to growth in 3Q, earlier than 2020 Ambition. EBITDA back to material growth in 3Q, slightly positive year-to-date

Merchant Services & Solutions: back to growth in 3Q

• Rapid recovery of Managed transactions and Value of managed transactions well progressing in 3Q
• E-commerce performance supported by non travel/tourism related sectors (+35% y/y in 9M20 and +35% y/y in 3Q20) 2 ; overall 9M20 performance less impacted by Covid-19 compared to physical sales (-1.1% y/y transaction value)
• 3Q Net Revenues positively impacted by volume mix more skewed towards Italian cards while Foreign cards still suffering

Cards & Digital Payments: International schemes volumes back to growth in 3Q

Digital Banking Solutions: marginally impacted by Covid-19

Strong costs reduction delivered in the quarter and year-to-date

Well progressing on 100+ €M cash cost containment plan to mitigate Covid-19 impacts. 63% already delivered in six months

Cost containment plan

Volume-base costs

• Personnel expenses (variable compensation, other related costs)
• Processing: reduction in line with volume trends
• External contact center calls

Discretionary spending

Operating Expenses

Consulting expenses

Internal and external events, travels, etc..

Voluntary waiver by Top

short term variable

compensation

management of their 2020

Hiring

59% Transformation Costs Postponement of few activities: YAP development 78% 47%

Other transformation projects

Capex

• Postponement of non strategic project spending (e.g. IT systems optimization)
• Limited re-phasing of IT strategy
• Postponement of real-estate investments

Confirmed continued focus and investments on key initiatives to drive future growth and efficiency

Strong cash position. Net Financial Debt / EBITDA temporarily affected by Covid-19

Net Financial Debt (€M)
Sept 19 Dec 19 June 20 Sept 20
Gross Financial Debt	1,878	1,840	2,741	2,747
Cash	271	248	316	406
Cash Equivalents 1	90	123	118	143
Net Financial Debt	1,517	1,470	2,307	2,198

Current Debt structure includes:

• 1 €B Term Loan due 2024
• 825 €M Fixed-Rate Note due 2024
• 500 €M equity-linked due 2027
• 466.5 €M term loan due 2025
• Other residual debt (mainly IFRS 16)

Nexi benefits of an undrawn 350 €M Revolving Credit Facility, committed to 2024, that further supports its liquidity profile

Weighted average pre-tax cash coupon per annum at 2.1%, still well below 3.8% post reorganization in July 2018 and 3.1% post IPO

Note: (1) Visa preferred shares held by the Company and Oasi post closing adjustments (until YE19)

2020 Guidance suspended. Ambition to grow EBITDA and EBITDA - Capex vs 2019

	Guidance1 Previous : suspended	2020 Ambition
Net Revenues	5-7% annual net revenue growth over medium term, targeting higher end of the range	 2020 volume-driven revenues depending on speed of recovery and dynamics by sector  Possible return to revenue growth	 Revenue growth positive in 3Q, ahead of plan  From late October new gradual Covid-19 restrictions in place
EBITDA	 13-16% annual EBITDA growth over medium term  Continued strong operating leverage	by year-end assuming continued path of recovery at current trajectory	 Government Cashback mechanism starts on Dec 1st
Non recurring Items	Rapid further decrease of non-recurring items affecting reported EBITDA	 100+ €M cash cost (Opex/Capex) containment plan to mitigate the impact on EBITDA and cash flow targeting:
Capex	 8-10% ordinary capex as % of net revenues over long term  Transformation capex on top of ordinary capex of 142 €M cumulative (2020 – c.2023)	 EBITDA growth vs 2019 including organic ISP book contribution, broadly in line without. FY2020	 EBITDA back to growth in 3Q and YTD, ahead of plan  100+ €M Cash cost containment being executed in line with plan
Capital Structure & Capital	Organic de-leveraging with target net debt of ~2.0-2.5x EBITDA over medium to long term  Progressive moderate dividend policy, targeting pay-out	EBITDA close to ~600 €M.  Material growth in EBITDA – Capex with and without ISP contribution
Allocation	ratio of 20-30% of distributable profits in medium to long term	 Strong cash position

€M	9M19	9M20	Δ% vs. 9M19	3Q19	3Q20	Δ% vs. 3Q19
Merchant Services & Solutions	411.1	393.6	-4.3%	146.2	150.7	+3.1%
Cards & Digital Payments	286.0	276.3	-3.4%	98.2	96.1	-2.1%
Digital Banking Solutions	84.7	83.8	-1.1%	28.8	29.2	+1.1%
Operating revenue	781.8	753.6	-3.6%	273.2	276.0	+1.0%
Personnel & related expenses	(123.7)	(114.9)	-7.2%	(38.4)	(35.4)	-7.9%
Operating Costs	(230.7)	(209.9)	-9.0%	(78.6)	(73.6)	-6.4%
Total Costs	(354.4)	(324.7)	-8.4%	(117.0)	(108.9)	-6.9%
EBITDA	427.4	428.9	+0.4%	156.2	167.0	+7.0%

2019 and 2020 data include ISP merchant book acquisition - quarterly data restated after ISP deal transaction close

SIA performance

Key Highlights

• Resilient and diversified business model
• Increase in transaction volumes during 3Q in Cards&Merchant Solutions and Digital Payment Solutions divisions
• 9M20 EBITDA flat y/y on an organic basis thanks to focus on operating costs efficiency

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Investor Relations

investor.relations@nexi.it

Stefania Mantegazza

stefania.mantegazza@nexi.it