TXT E-Solutions — Investor Presentation 2016

Apr 22, 2016

TXT e-Solutions Alla frontiera dell'innovazione: Cloud Managed Services nel Business Plan di TXT Retail e di TXT Next

Borsa Italiana – April 2016

The material in this presentation has been prepared by TXT e-solutions ("TXT") and is general background information about TXT's activities current as at the date of this presentation. This information is given in summary form and does not purport to be complete. Information in this presentation, including forecast financial information, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk.

This presentation may contain forward looking statements including statements regarding our intent, belief or current expectations with respect to TXT's businesses and operations, market conditions, results of operation and financial condition, capital adequacy, specific provisions and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. TXT does not undertake any obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside TXT's control. Past performance is not a reliable indication of future performance.

Unless otherwise specified all information is for the Fiscal Year ended December 31th 2015.

The TXT Opportunity

Fashion, Luxury & Specialty Retail

• 1.000+ Tier 1 and Tier 2 Companies World-wide;
• 2.500+ Tier 3
• «Digital Transformation» of the Retail Industry is the driving force behind the Omni-channel revolution
• Omni-channel challenges drive a growing demand for End-to-End Lifecycle Management Solutions
• A global market opportunity of 1.2+ b€, growing 8+% CAGR till 2020

Aerospace, Automotive & Transport

• 200+ Global Aerospace & Aviation large Groups;
• 200+ Automotive & Rail global Tier-1
• A consolidated industry, posted for long-term growth at 5% CAGR till 2033, despite shortterm fluctuations
• High R&D and Engineering budgets, under the pressure of products differentiation, emerging technologies and environmental & regulatory challenges
• 230+ b€ externalised R&D & Engineering services across the entire Product Lifecycle, growing at 6% CAGR till 2020

Aerospace & Aviation 5-Years Strategy

Deep Knowledge of the Aerospace & Aviation Industry, spanning the entire Product Life-cycle

Inside our Customers' PRODUCTS Inside our Customers' CORE PROCESSES

TXT Next PACE

TXT Next + Pace: Well Positioned to Capture the Market Opportunity

Selling Globally Delivering Globally

70+ Customers

300+ Engineers

• … as «Engineering Solution» Partner, leveraging the «People + IP» paradigm:

• Exploiting complementary TXT-PACE domain knowledge, technology skills & software assets across a single, global Customer Base;
• Organically …
• … and through further Acquisitions

• … Investing in innovative Software Products:

PACE	TXT Next

Airborne Software, Simulation & Operations Support

TOOLS	LIBRARIES & FRAMEWORKS		APPLICATIONS
	Virtual Display	Virtual Panels
HARPS	Generic	Smart	Airdass
TestControlPlatform	Models	Gateway	FlightPlanner
QualificationTool	SimRTI		LiOS
SmartTuning	AeroMaps	AR/VR	SF ms
D&US	Aircraft Performance	TXTFusion TXTVirtualizer	VDesk
Hums4FlightSims	Calculator	TXTEye	VTE

Digital Manufacturing

• … investing in innovative Cloud-based models to deliver Solutions & Managed Services; Some examples …

Centralized Management (preparation, update, etc.) & Analysis of Airborne Systems Operational Data, according to DO200 regulations

AIRBORNE NAVDATA MANAGEMENT MANAGED SERVICE

Managed Services for Cloudbased post-flight analysis of flight performance "big data" to feedback flight planning and flight performance optimisation activities

CLOSED-LOOP FLIGHT PLANNING, FLIGHT OPTIM. & DATA ANALYSIS SERVICE

Managed Services for ….. Managed Service for Software Maintenance of a Fleet of Simulators provided by means of a Cloud-Based Health Monitoring & Fix / Deploy System

SIMULATOR FLEETS LONGTERM REMOTE MAINTENANCE SERVICE

Fashion, Luxury & Specialty Retail 5-Years Strategy

April 21, 2016

How Industry Transformation impacts Omnichannel Retailers' Key Business Processes?

The Omnichannel Retailers' «Merchandise Lifecycle»:

A strategic & complex End-to-End process that involves many actors that real-time collaborate to generate growth & profit by cost-effectively selling compelling customer focused collections across multiple interacting retail channels

• 15+ New Major Customers and 50+ Go-Lives of Major Projects, each Year …
• … across all Segments, Business Models & Geographies

April 21, 2016

TXT Retail: Focused on the End-to-End Merchandise Lifecycle

End-to-end Merchandise Lifecycle Management

Core to Retailers' competitive differentiation is the Merchandise Lifecycle, the end-to-end process that encompasses:

• Understanding customer needs and opportunities,
• Devising a brand and product strategy,
• Developing and sourcing a compelling collection,
• Optimizing the assortment across markets and channels,
• Buying and delivering the products
• Managing the sell out to optimise the return on merchandise investment.

TXT Retail: Well Positioned to Capture the Global Market Opportunity

TXT Retail 5-years Strategic Plan: Global Leadership

Execution

• Geography: Global Leadership

• Industry: from mainly Lower Tier-1 and Upper Tier-

Vision & Innovation

• The Offering: Cloud-based Managed Services & Cloud Deployment
• Customer Dimension: Capturing wider & deeper customer attributes in Merchandise Lifecycle Management
• The Software: Another leapfrog jump ahead of competitors in Technology
• AgileFit: Extending breadth of process coverage & depth of verticalisation

From Software Vendor To Transformational Enabler in the Omni-channel Journey of Global Retailers

The 1 st & only End-to-End Merchandise Lifecycle Management Software

TXT Retail enables Customerdriven Merchandising Excellence through an End-to-End Merchandise Lifecyle Management Software featuring:

• A unified database that informs the End-to-End Merchandise processes
• Real-time integration across all Merchandise Lifecycle processes
• Collaboration across all actors in the Merchandise Lifecycle processes, blending art, science & mobility as appropriate
• Productivity enhancing UI: "2 hours adoption" thanks to the right UI for each User & Task.
• Flexible configuration: it helps you adopting business process best practices, and flexes as the market & your organization change

TXT Retail Strategy Pillars: AgileFit - Business Best Practices «Ready to Go»

• Extend Value Proposition to include Cloud-based Managed Services and Merchandise Lifecycle Management Cloud Services (SAAS)
• This reduces TCO of TXT Retail & strengthens TXT Retail's position as "Transformational Enabler" for its Customers

Merchandise Lifecycle Management Cloud Strategy

Industry Segment Fashion, Luxury and Apparel					Solution Areas Potential
Customer Tier	N. of Companies*	Cloud Strategy	Target Revenue Model	Supply Chain Collaboration	Collection Lifecycle Management	Store Forecasting and Replenishment	Merchandise Financial Planning	Assortment Planning and Buying
Tier1	23	Cloud Managed Services	License, Maintenance, Services
Tier2	233	Cloud Managed Services	License, Maintenance, Services
Tier3	1500	Merchandise Lifecycle SAAS	Set Up plus Recurring Fees

• Market Mature, TXT Ready
• Early Adopters, TXT Ready for Pilot Customers
• Market Maturing, TXT Preparing for Pilots
• Market Not Ready

TXT Retail Strategy Pillars: The Customer Dimension

April 21, 2016

TXT Retail: The End-to-End Merchandise Lifecycle Opportunity

Competitive Differentiation and Enablers for Customer Success

Summary & Financial Details

Alvise Braga Illa – Chairman

After graduating at the Polytechnic Institute in Milan, Mr Braga Illa was for 10 years in research and teaching at the Lincoln Laboratory and Massachusetts Institute of Technology, innovating in satellite technology, optical communication and network systems. He directed the R&D Labs at Italtel, founded Zeltron S.p.A. and managed the restructuring of Ducati Energia as General Manager. Mr. Braga Illa founded TXT Automation Systems, later sold to ABB (1997), and TXT e-solutions (1989).

Marco Guida – CEO

Graduated in Electronic Engineering, Marco Guida managed innovative IT projects in various areas of the manufacturing operations of Pirelli Group until 1994, when he joined TXT e-solutions. Initially responsible for Advanced Information Systems, in January 2000 promoted to Vice President. As Director of International Operations he successfully led the transformation of TXT e-solutions from an Italian to an International Group. Since 2009 he is Chief Executive Officer of TXT Group.

Paolo Matarazzo – CFO

After graduating from Milan's Bocconi University and majoring in business administration at the University of San Diego (California), has had significant experience in the financial world. He was initially an analyst in London for three years and then worked for the Recordati Group for seven years, with responsibility for treasury management. In the following seven years he was Head of Finance, Administration & Control in Europe for Eurand, a company listed on NASDAQ. He joined TXT in May 2007 as Group CFO.

April 21, 2016

• TXT Retail
• Global Retail Industry is large, growing & dynamic: e-commerce, new business models, new players
• Planning is a «big niche» & a growing investment area for Retailers
• TXT has a unique offering and a solid competitive position, sustained by constant innovation
• Large, world-wide base of happy global customers.
• Global presence with the opportunity to further expand in North America and APAC markets.
• TXT Next + PACE
• Large, innovative & healthy target markets, with long-term positive trends
• Highly fidelised customer base
• Solid team with 30+ years of domain expertise
• Specialised know-how consolidated in Sw assets: differentiation, competitive advantage and margins

• Leader with the opportunity to continue growing in Europe, both organically and through targeted acquisition, and to accelerate international development

• International profile: >55% of Revenues from Int'l markets, and growing

• Growth in Revenue, Profit & Cash
• Large fidelised customer base of 350+ blue-chip customers: a key asset in good & bad times, hard to replicate for new competitors
• Solid presence in large, healthy markets with very high growth potential
• Upside growth potential: opportunity to capitalize existing product & know how in other industries
• Innovation is in our DNA: historically a «1° mover» in many markets
• Solid & stable management team, who are shareholders of TXT
• Cash & Stock Dividend policy
• Expanding Shareholder base: co-workers & management; private & retail; institutional investors
• Financially solid and self-sustainable

2015 – Growth of Revenues and development investments

€ thousand	2015	%	2014 (1)	2014 non recurring	2014 Normalized (2)	%	Var % vs 2014	Var % vs 2014 Normalized
REVENUES	61.540	100,0	55.878	(1.468)	54.410	100,0	10,1	13,1
Direct costs	29.189	47,4	26.455	(407)	26.048	47,9	10,3	12,1
GROSS MARGIN	32.351	52,6	29.423	(1.061)	28.362	52,1	10,0	14,1
Research and Development costs	5.118	8,3	4.698		4.698	8,6	8,9	8,9
Commercial costs	12.681	20,6	11.094		11.094	20,4	14,3	14,3
General and Administrative costs	7.893	12,8	6.839		6.839	12,6	15,4	15,4
EBITDA before Stock Grant	6.659	10,8	6.792	(1.061)	5.731	10,5	(2,0)	16,2
Stock Grant	740	1,2
EBITDA	5.919	9,6	6.792	(1.061)	5.731	10,5	(12,9)	3,3
Amortization, depreciation	1.124	1,8	1.325		1.325	2,4	(15,2)	(15,2)
OPERATING PROFIT (EBIT)	4.795	7,8	5.467	(1.061)	4.406	8,1	(12,3)	8,8
Financial income (charges)	(151)	(0,2)	(249)		(249)	(0,5)	(39,4)	(39,4)
EARNINGS BEFORE TAXES (EBT)	4.644	7,5	5.218	(1.061)	4.157	7,6	(11,0)	11,7
Taxes	(762)	(1,2)	(1.046)	197	(849)	(1,6)	(27,2)	(10,2)
NET PROFIT	3.882	6,3	4.172	(864)	3.308	6,1	(7,0)	17,4

(1) Official Financial Reporting.

(2) Income Statement 2014 includes non-recurring income of 1.468k€ and non-recurring costs of 407k€. In order to compare performance w ith current year, financial results 2014 have been "Normalized" excluding non-recurring Revenues and Costs. Taxes have been calculated pro-rata.

Strong Balance Structure

€ thousand	31.12.2015	31.12.2014	Var
Intangible assets	14.692	15.079	(387)
Tangible assets	1.361	1.249	112
Other fixed assets	2.079	1.692	387
Fixed Assets	18.132	18.020	112
Inventories	2.075	1.821	254
Trade receivables	25.032	18.571	6.461
Other short term assets	2.759	2.197	562
Trade payables	(1.422)	(1.540)	118
Tax payables	(1.291)	(1.117)	(174)
Other payables and short term liabilities	(16.090)	(13.606)	(2.484)
Net working capital	11.063	6.326	4.737
Severance and other non current liabilities	(3.830)	(3.841)	1 1
Capital employed	25.365	20.505	4.860
Shareholders' equity Net financial debt	33.624 (8.259)	28.970 (8.465)	4.654 206
Financing of capital employed	25.365	20.505	4.860

•Share Price

•31.12.2010: 1.51€/share (rebased for free share distribution) •29.2.2016: 7.76€ /share

• Dividends

• •2011: 1 € /share (extraordinary, rebased)
• •2012: Free Share Distribution 1:1
• •2013: 0.20 € /share (rebased)
• •2014: Free Share Distribution 1:1
• •2014: 0.25 € / share
• •2015: Free Share Distribution 1:10
• •2015: 0.25 € / share
• •2016: 0.25 € / share

TXT Market Capitalization (m€)