Nexi — Investor Presentation 2020

Feb 12, 2020

nexi

FY 2019 Preliminary Results

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February 12th , 2020

• 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.

Executive Summary

Strong focus on financial delivery

• EBITDA +18.5% y/y growth, at 502.5 €M in FY 2019
• Revenues +7.1% y/y underlying growth excluding zero-margin hardware reselling contracts. +5.7% y/y reported growth at 984.1 €M in FY 2019
• Improved Net financial Debt/EBITDA at 2.9x from 3.5x post IPO

Continued progress on key business initiatives

• Merchant Services and Solutions (49% of Revenues): continued growth on SmartPOS proposition, release of new omnichannel capabilities, acceleration of omni-acceptance, further acceleration on E-Commerce
• Cards and Digital Payments (39% of Revenues): continued growth of International Debit, YAP millennials payments app and CVM up/cross selling activities
• Digital Banking Solutions (12% of Revenues): underlying FY growth thanks to new propositions acceleration, further step into Open Banking leadership thanks to the tender win for extending CBI Globe capabilities and use cases
• Cost initiatives and integration synergies contributing to -4.9% y/y reported costs reduction, -2.9% y/y excluding zeromargin hardware reselling contracts, despite continued investments
• Transformation costs below EBITDA -60% y/y
• Continued focus on investments in Technology and Innovation: Capex at 167 €M, 17% of Revenues

FY 2019 performance better than IPO guidance

2020 target growth in line with IPO medium/long term guidance, starting from a stronger 2019

2019 highlights

Healthy Revenue growth and strong EBITDA performance

Note: (1) Proforma for Group reorganization and OASI / Bassilichi non core disposal

Merchant Services & Solutions: continued strong growth

Merchant Services & Solutions: key business update

Be the payment services provider of choice for every Italian merchant, in partnership with our partner banks	SmartPOS	 Continued progress on SmartPOS proposition, with frontbook penetration up to 40% during CVM supported campaigns on active banks  Strong interest across all merchant segments, from SME to Large Merchants, and industries  Cassa1 Growing success of SmartPOS , also due to new regulation on electronic tax data transmission, with frontbook penetration at 24% in 4Q on SmartPOS sales
	Large Merchants Omni-Channel	 Release of new omni-channel capabilities including cross border and most advanced solutions  Further investment on dedicated team, with focus on vertical industry experts and solution engineers  Acceleration of advanced vertical solutions on Large Merchants (insurance, grocery, mobility,); ~50% of flagship initiatives on International Brands
	E-Commerce	 Continued growth supported by physical customer base cross-selling (with full cross-channel contractual enablement already in place), partnerships with developers and software vendors, large omnichannel merchants and Public Administration
	Omni Acceptance	 Acceleration of multiple payment rails acceptance (meal vouchers and Asian schemes)  Roll-out of new PagoBancomat capabilities (c-less, mobile payments enabling) with over 50% upgraded POS acceptance in 1 year
	Nexi Business data app	 Nexi Business Merchant app, data/business intelligence service, achieving >220k enrolled merchants (+100k from December 2018), with positive customer feedback (4.6 rating on Apple store)  Overall penetration on addressable merchant base at 42%, with best practice at ~80%

Cards & Digital Payments: continued strong growth

Cards & Digital Payments: key business update

Be the Italian banks' partner of choice, offering a full portfolio with best-in-class Cards and Digital Payments services for customers	Credit	 New full corporate proposition including virtual account B2B and lodge solutions now fully launched. Growing spontaneous interest from corporates across multiple industrial sectors  New premium credit cards with leading capabilities (fully digital experience, world elite program,…)
	Debit	 Continued growth of International Debit (+30% y/y transaction value) with 34 banks now active  National Debit upgrade delivered: c-less and tokenization, mobile features under development
	Customer Value Management and Value-Added Services	 Further development and roll out of distinctive capabilities supported by internal data scientist team to drive usage and up/cross selling to higher value products: ~200 available campaigns, 90 banks engaged  Strong usage elasticity with ioVINCO instant lottery: +13p.p. faster growth in managed transactions (active versus not active) and +34% y/y active users  Redesign of premium loyalty program with +30% y/y subscribers
	Digital	 All Banks now active with mobile payments. Wearable experience now extended to Fitbit and Garmin  Supporting large banks on their digital properties (API gateway integrations and whitelabel projects) while continuing to push for the adoption of Nexi digital properties (Nexi Pay app and Nexi portals)
	YAP millennials payments app	 Continued progress on YAP, with ~750k enrolled clients to date (up from 105k at the end of 2018). Positive customer feedback, with >50 Net Promoter Score and 4.8 rating on Apple store  "Bank-connect" solution to engage banks in go-to-market; early implementations now live

Digital Banking Solutions: accelerated underlying performance

• Return to growth confirmed, with FY19 Net revenues at +1.8% y/y
• Growth acceleration supported by roll out of new higher value and more advanced self banking products/platform and Digital Corporate Banking
• Early contribution from Open Banking solutions deployment

Digital Banking Solutions: key business update

Provide state-of-the art innovative solutions to support Bank customers digitalization with	Self-banking	 Continued roll out of new higher value advanced self banking products/ solutions  Continued growth of advanced ATMs installations, in the context of Banks' branches transformation plans
E2E outsourcing models	Digital Corporate Banking	 Rolling out of new advanced platform with key partner banks. Live with new innovative corporate mobile app  Continued organic growth of installed workstations on active partner banks
	Instant Payments	 Continued progress on new banks/financial institutions onboarding and rollout
	Open Banking	 280+ banks/financial institutions live (over 78% of Italian market) and 80+ third parties already connected to PSD2 Open Banking gateway  Won banking system tender for the new CBI Globe TPP Gateway capabilities aggregating and harmonizing other Italian and European gateways and enabling new fintech services from banks and third parties  Innovative value added services for financial institutions and corporates under development, also leveraging partnerships with fintech leading vertical players

Costs: strong reduction despite continuous investment in development initiatives

• Strong decrease in operating costs driven by:
  • continuous saving initiatives
  • synergies from the integration of acquired businesses slightly ahead of plan
  • early impacts from implementation of IT strategy
  • IFRS 16 impact ~13.6 €M in FY 2019
• Continued investment in people capabilities

Continued investments to support quality, innovation and IT transformation

IT strategy progressing in line with plan. 142 €M expected to complete by 2023 (included in guidance)

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FY 2019 Transformation Costs in line with guidance

Cost of debt reduced to 1.9% from 3.8% post reorganization in July 2018. Extraordinary events impacted 2019 Reported Interest Expenses

Normalized Net Profit growing 19% Y/Y

Cash Flow conversion increased to 77% vs 74% in FY 2018

Net Financial Debt / EBITDA at 2.9x at year-end

Net Financial Debt (€M)
	Dec 18	Dec 19
Gross Financial Debt	2,605	1,840
Cash	(41)	(248)
Cash Equivalents 1	(110)	(123)
Net Financial Debt	2,454	1,470

Net Financial Debt / EBITDA (€M)

Key Highlights

Nexi's credit ratings unchanged following announcement of ISP's merchant acquiring business acquisition²

• 825 €M 1.75% Senior Unsecured Notes (due Oct2024) issued in October to repay 825 €M 4.125% Senior Secured Notes (due Nov2023)
• Indebtedness now fully unsecured
• Weighted average pre-tax cash coupon per annum reduced from 3.1% post IPO to 1.9% (3.8% post reorganization)

Current Debt structure:

• 1 €B Term Loan due 2024
• 825 €M Fixed-Rate Note due 2024
• Other residual debt (mainly IFRS 16)

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

Note: (1) Visa preferred shares held by the Company, VISA Europe deferred compensation (until Q1 2019) and Oasi post closing adjustments. (2) S&P Global Ratings affirmed both Nexi BB- ratings and the positive outlook. Moody's Investors Service changed the outlook to stable from positive, while affirming the previous corporate family and instrument ratings at Ba3. Fitch Rating placed both Nexi LT issuer default rating of 'BB' and the debt rating of 'BB' on rating watch negative

Government initiatives to support digital payments

Main measures approved in 2020 Fiscal Decree and 2020 Budget Law

Cash-back bonus for consumers from 1st July 2020	Cash-back for digital payments: 3 €B yearly allocated to finance cash-back. Operational execution still under definition. In place for 2 years	Tax credit on merchant fees from 1st July 2020	30% tax credit on merchant fees for card/digital transactions dedicated to small merchants (merchant's revenues <€400k in the previous tax year). In place for 2 years
Lottery on receipts from 1st July 2020	Prize draw for consumers: 3 €M yearly allocated for cash payments, 45 €M for electronic payments. In place for 3 years	Progressive reduction of cap on the use of cash	Cap on cash usage per single purchase: - from €3,000 to €2,000 from 1st July 2020 - to €1,000 from 1st January 2022
Tax deductibility from 1st July 2020	19% tax deduction on tax deductible expenses (i.e. interests on mortgages, sport centers/school expenses; some medical expenses excluded) if payments are made by traceable instruments

Acquisition of ISP's Merchant Acquiring: a strategic transaction strengthening Nexi's role as the leading Italian paytech

Key components of the transaction

• ~180k merchants¹ and ~€66bn of transaction volumes²
• Marketing and distribution agreement for merchant acquiring. Extension of remaining existing processing contract related to issuing and ATM acquiring services until 2044
• 1 €B cash consideration (plus potential earn-out payable in 2025), with committed bridge financing already in place
• Implied multiples: 10.5x EV/EBITDA 2020E, 16.4x P/E 2020E
• Cash flow generated by the acquiring book from Jan 1st to closing transferred to Nexi at the closing date

A strategic transaction

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- Enhanced platform and positioning in the acquiring segment

• Greater coverage of the acquiring value chain and enhanced ability to drive further innovation and value for merchants
• Increased scale with diversification of revenue streams

Value enhancing transaction with cash EPS accretion in the high teens from 2020E

Deepening of partnership across businesses with the largest bank in Italy

Nexi Nexi Pro Forma

Reiterating IPO guidance growth starting from a stronger 2019

Net Revenues	• 5-7% annual net revenue growth over medium term, targeting higher end of the range
EBITDA	• 13-16% annual EBITDA growth over medium term • Continued strong operating leverage
Non-recurring Items	• Rapid further decrease of non-recurring items affecting reported EBITDA
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) • Total capex to trend towards ordinary capex as % of net revenues over medium to long term
Capital Structure & Capital Allocation	• Organic de-leveraging with target net debt of ~2.0-2.5x EBITDA over medium to long term • Invest in organic growth; potentially consider accretive and strategically compelling M&A • Progressive moderate dividend policy, targeting pay-out ratio of 20-30% of distributable profits in medium to long term

ISP transaction not included

2019: strong financial delivery and progress in building a stronger Nexi

Strong financial delivery

Healthy growth in all Business Areas

984 €M 2019 reported Net Revenues

+7% Underlying y/y growth (MSS +8%, CDP +7%, DBS +2%)

Over delivery vs IPO guidance

• +18.5% EBITDA y/y growth (vs 13-16% IPO guidance)
• 2.9x Net Debt/EBITDA (vs 3-3.5x IPO guidance)

Improved Cash Flow Generation

• 389 €M 2019 Normalized Operating Cash Flow¹ (+25% y/y)
  • 77% 2019 Cash Flow Conversion² (+3p.p. vs 2018)

Active and effective capital structure management

• 1.9% Cost of debt (from 3.1% post IPO)
• 43 €M Normalized yearly interest expenses³

Building a stronger Nexi

Accelerated penetration of key propositions

SmartPOS, International Debit, Digital Corporate Banking, ...

Strengthened position in key strategic areas

Multichannel/e-commerce, Open Banking, Mobile, ...

Progressed IT Transformation, further invested in key capabilities

Technology, Big Data/AI, Vertical segments competence, ...

Extended strategic position in acquiring through disciplined and value accretive M&A

ISP's Merchant Acquiring strategic transaction

	Underlying growth excluding run off of zero-margin HW reselling contracts from acquisitions				Underlying growth excluding run off of zero-margin HW reselling contracts from acquisitions
€M	FY18	FY19	Δ% vs. FY18	Δ% vs. FY18	4Q18	4Q19	Δ% vs. 4Q18	Δ% vs. 4Q18
Merchant Services & Solutions	448.2	479.0	+8.1%	+6.9%	120.7	131.4	+7.7%	+8.9%
Cards & Digital Payments	360.6	387.4	+7.4%	+7.4%	94.1	101.4	+7.7%	+7.7%
Digital Banking Solutions	121.7	117.7	+1.8%	-3.3%	35.6	32.9	+7.9%	-7.6%
Operating revenue	930.6	984.1	+7.1%	+5.7%	250.4	265.7	+7.7%	+6.1%
Personnel & related expenses	(155.3)	(166.6)	+7.3%	+7.3%	(41.0)	(44.7)	+9.1%	+9.1%
Operating Costs	(351.2)	(315.0)	-7.6%	-10.3%	(94.3)	(86.9)	-4.4%	-7.9%
Total Costs	(506.4)	(481.6)	-2.9%	-4.9%	(135.3)	(131.6)	-0.1%	-2.7%
EBITDA	424.1	502.5	+18.5%	+18.5%	115.1	134.1	+16.4%	+16.4%
D&A	(74.8)	(120.5)	+61.1%	+61.1%
Interests & financing costs	(64.4)	(42.6)	-33.8%	-33.8%
Normalized Pre-tax Profit	285.0	339.4	+19.1%	+19.1%
Income taxes	(95.8)	(115.8)	+20.9%	+20.9%
Minorities	(1.5)	(0.9)	-41.1%	-41.1%
Normalized Net Profit	187.7	222.7	+18.7%	+18.7%

Reported P&L vs Normalized P&L

€M	Reported FY19	Delta	Normalized FY19
Merchant Services & Solutions	479.0		479.0
Cards & Digital Payments	387.4		387.4
Digital Banking Solutions	117.7		117.7
Revenues	984.1		984.1
Personnel & related expenses	(166.6)		(166.6)
Operating Costs	(315.0)		(315.0)
Total Costs	(481.6)		(481.6)
EBITDA	502.5		502.5
D&A	(157.8)	37.2	(120.5)
Interests & financing costs	(159.9)	117.3	(42.6)
Pre-tax Profit	141.0	198.4	339.4
Income taxes	(10.1)	(105.7)	(115.8)
Minorities	(0.9)		(0.9)
Net Profit	130.0	92.7	222.7
1 Transformation costs	(51.9)		(51.9)

Delta

D&A: D&A customer contracts

Interests & financing costs: coherent with the new debt structure (detailed bridge on slide 15)

Non recurring items: detailed bridge on slide 14

Income taxes: Partecipation Exemption regime on Oasi disposal and favourable tax ruling (DTA) on certain corporate transactions

ISP transaction: impacts on guidance (as per December 19th presentation)

Investor Relations

investor.relations@nexi.it

Stefania Mantegazza

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stefania.mantegazza@nexi.it