TXT E-Solutions — Investor Presentation 2018

Feb 6, 2018

TXT e-Solutions

Corporate Overview February 2018

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 first semester ended 30 September 2017.

+ NOTE: In 2016 TXT acquired PACE Aerospace & Engineering Technology GmbH, consolidated starting on April 1st, 2016, to accelerate international growth

α NOTE: Net of one-off items ("official" 2016 EBITDA = 3.8 m€)

Aerospace & Aviation

6

Since 30 years Partner for our Clients to boost their Engineering Capabilities

Products & core Processes are highly complex … … calling for cooperation across an extensive

network of Specialised Partners

Our Vision & Goal is to become:

• An Int'l, specialized, multi-niche, mid-sized (100 m€) provider of Engineering "Solutions" (Software & Services)
• Serving the global Aerospace & Aviation Industry
• Via both organic AND inorganic growth initiatives

Customer Base - A Longstanding, Global Customer Base across the Value Chain

• A diversified Customer Base of Industry Leaders
• Long-term partnership underpinning highly repeatable revenues streams
• A growing number of new, high-potential international customers in recent years
• A significant up-selling opportunity

What We Do - Value Proposition Spanning the Entire Product Life-cycle

• Industry and Technology expertise: Engineering Services, backed by Software Assets
• Breadth and Depth: focus on high-value niches, but understand the whole picture

How We Do It - Engineering Solutions: Software Assets Global Map

Turn-Key service engagements weight ¾ of the total, while Time & Material account for the remaining ¼

30+ Years in the Industry, 340+ Specialised Engineers and Growing Int'l Presence …

• Local presence, to provide best-in-class on-site support to key customers;
• Corporate competence centers, to deliver & support customers across their business in 30+ Countries

A unique spectrum of specialized high-value niches across the entire Product Life-Cycle, that differentiates us from local and global competitors

	PRODUCT DESIGN & DEVELOPMENT		PRODUCTION & CUSTOMER ENGINEERING		OPERATIONS
	PRELIMINARY DESIGN	ON-BOARD SOFTWARE	DIGITAL MANUFACTURING	PRODUCT CONFIGURATION	TRAINING & SIMULATION	FLIGHT OPERATIONS
TXT
aLTRan
LYE
philotech
տ $\bullet$ assystem
ESG
CRITICAL
Leones
HCL
$\bigoplus$ TATA TATA CONSULTANCY SERVICES
Tech Mahindra

• Small, Local Players:

• Deep in single niches, compete mainly in price and locally
• TXT differentiates and competes with its depth AND breadth, know-how AND IPs, resources to invest in co-innovation, ability to follow customers globally. Small local players are possible acquisition targets

• European-based Large Players:

• Grown via acquisitions and massive time & material contracts, are challenged on responsiveness, flexibility and margins. Forced to focus on high-volume low-value activities to bill large teams and spread across a wide spectrum of industries/domains (not only SW-related services!)
• TXT differentiates and competes with its people AND IP approach, focus on SW-related activities, and its 30 years track record in managing resultsbased engagements and profitable turn-key contracts

• Large Off-shore Players:

• Mainly from India, historically rooted in technology-based; largely leveraging on off-shore delivery models, they lack the proximity and customer intimacy needed to deepen business understanding. Forced to focus on high-volume low-value execution activities to bill massive teams.
• TXT differentiates and competes with its technology AND industry expertise, the depth of its know-how, a balanced compromise between proximity (local teams) and "near-shoring" (corporate competence center), that turns into an attractive value proposition for customers, especially in high-value, results-based engagements

A large & healthy Industry: global groups, with high speed of innovation and sustained R&D / Engineering spending

			erospace & Aviation Market Overview: Engineering Solutions & Services Market is worth 130 b $\in$
		A growing and transforming market
50% of the total		. Embedded Systems & software components of products accounts for approx.	Changing Business Models: from Engineering "Services" to Engineering
. Aeronautics & Automotive Industries account for c.20% each of the Total Market, fostered by steadily high level of investments around new products	"Solutions", around the "People + IPs" paradigm that enables a growing portion
Services, across the entire Product Lifecycle		* CAGR +10% until 2020, fostered by a widening spectrum of externalized	high value activities be Ωf to externalized
	Engineering and R&D services market
2015 by industry	Global market size (€bn)	Growth levers	$^{\circ}$ People Expertise
Telecom & Hot-tech Metical 21% Energy & Devices, 7% Utiles, 11%	220 SPIN CAGE SATS m 25	Transformational outsourcing acceleration Externalization rate increase $(40.5%$ yoy)	Technology Building Blocks
Industrial Equipments. 12%	45.	Underlying growth (R&D spending $+6\%$ you)	IP Assets Proprietary Software IPs
Automotive. Acrospace & 19% Defense, 18%	150	5-year CAGR by region: FU1 5.7% US: 9-11% Asia: 13-15%	Proprietary Methods & Tools
Spurce: TXT estimates. Zinnay. McKinsey. Altran	2015 2020E
July 2017

Engineering Solutions & Service Market worth 130 bn€; Aerospace & Automotive accounts for 20% each; Business Models evolving

Europe accounts for a large share of the Market

Not only large R&D and Engineering service providers: a fragmented competitive landscape, that offers space for both organic and inorganic growth, around software niches of high specialisation across the product life-cycle

Growth Strategy & Plans – Summary

Solid Foundations

• Solid Management Team with a track record in self-sustainable organic growth AND acquisitions
• 340+ specialised engineers, with global delivery & support capability
• «People»'s Technology AND Industry expertise, backed by a portfolio of software assets
• Breadth AND depth across the Product Lifecycle, with focus on software
• 50+ Customers, industry leaders
• Track record in risk-sharing & results-based engagements

Identified Growth Initiatives

Our Vision: to become an Int'l, specialized, multi-niche, mid-sized (100 m€) provider of Engineering "Solutions" serving the global Aerospace & Aviation Industry

• 1. Inorganic Growth 2. Organic International Expansion 3. Offering Innovation • Be a platform to aggregate niche engineering software solution providers • Selectively target mid-sized acquisitions • Grow the share of wallet in current customers: focus on higher-value activities and risk-sharing engagement models • Capture new Int'l customers, leveraging on the combination of software assets and specialized service capabilities • Product innovation: extend the capabilities and the range of the offering of Sw Assets • Service innovation: expand the offering with Managed Services
• 4. Automotive
• Diversification & upside-growth opportunity

16

Banking & Finance

• Since 15 years focused on Software Quality and on Independent Testing, Verification & Validation of software, to ensure the functioning, functional fit, and compliance of IT systems
• It has adapted best practices, tools and methodologies from Aerospace to the needs of the Banking Industry
• It targets the 40-50 top Italian Banking institutions
• With 100% of revenues from SW Services and from Italian Customers, it is regular contributor to cash-flow
• It is experiencing a good market momentum

Services across the end-to-end Software Quality and Independent Testing, Verification & Validation Lifecycle

Test Strategy	Test Development	Test Execution	Defect Management & Reporting	Test Environments Administration	Test Management Suite Administration
------------------	---------------------	-------------------	-------------------------------------	----------------------------------------	--------------------------------------------

• Domain Expertise in core Banking domains (Accounts, Lending, Mortgage, Internet Banking; Card and Digital Payments; Branch & Departmental applications): Functional Testing accounts for the largest share
• Deep knowledge of Methodologies and Tools, spanning across the entire QA & Testing process
• Testing Services both "on-site" and "off-site", with an approach based on "Test Factory"
• People expertise, and a growing library of Testing "Bricks": our reusable Software IPs

Current Scope	Current Process	Internet	Internet Mobile	VR + Call Center	Bank Office Web based	Android APS	Office Back Bank C Host / I ffice
	Opening and operating steps	X		X	X		X
	Receipts and payments	Χ	Χ	X	X	X	X
Bank account	Credit cards	X	X	X	X	X	X
	Debit cards	X	X	X	X	X	X
	Opening process	$\times$	X	X	X	X	X
Prepaid card	Management	X	X	X	X	X	X
	Opening and operating steps	X		X	X		X
Deposit account	Operations	$\times$	X	X	X	X	X
	Constraints management	X	X	X	X	X	X
Mortgages	Quote calculation	$\chi$	X	X	X	X
	Investigation management
	Installments disbursement and management	X	$\chi$	$\times$	$\mathsf{x}$	X

Growth Strategy & Plans – Market Opportunity

• Stratified, complex, highly heterogeneous & rapidly evolving IT landscape, coupled with increasingly stricter regulatory frameworks, makes Software Quality a mandatory, yet challenging task
• Emerging "Fintech" software & services increase complexity of the Banking software systems
• SW Quality is a key pillar of Banks' IT strategy and it captures a growing Portion of Banks' IT Budgets
• Growing Software Quality costs demand for new approaches to drive higher efficiency in QA processes
• TXT estimates that the Italian Market potential for QA & Testing Services in the Banking sector is 100+ M€

Tools (Software Licenses) Split of QA and Test Budget

• Hardware and Infrastructure
• Human Resources

Executives' Priorities for QA and Testing

Keep growing organically in the Sw Quality & Testing domain, with a primary focus on the Italian Market

Strengthen the Foundations of Software Quality & Testing Services

• Domain Expertise & IP assets: continue differentiating by deepening domain knowledge in specific Banking processes & challenges, capturing it into standardised "Testing Bricks"

• Standard Tools, but TXT Methods: Innovate in Testing methodology, approach and best practices, mastering a wide range of market leading Tools: HP Enterprise ALM Suite, Fortify, IBM Rational, opensource, …

• Expand the portfolio of Testing capabilities & Practices to Security, Mobile and Fintech-related testing services and to Test Automation approaches, and integrate them into the Test Factory

Summary & Financial Details

TXT e-solutions Global Targets

• Organic Growth

• Aerospace & Aviation: 8-10% per annum, with focus on International Growth
• Banking & Finance: 5+% per annum, 100% Italy
• Self-financed R&D and Marketing & Sales
• Constant equilibrium across growth & profit
• EBITDA Margin: 12% Global Target
• Inorganic Growth – Aerospace & Aviation
• Mid-sized (5-20 m€ revenues) and profitable
• International Profile
• Solid customer base, strong team, committed management and long history in the industry
• Highly specialized knowledge sustained by innovation capability and differentiating software assets
• Complementary, to broaden one/more of: the offering, the geographical presence, the customer base, the penetration within existing accounts and/or domains
• Fairly valued

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.

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 November 2007 as Group CFO.

9m 2017

€ thousand	9m 2017	%	9m 2016	%	Var %
REVENUES	26.032	100,0	23.469	100,0	10,9
Direct costs	14.906	57,3	13.731	58,5	8,6
GROSS MARGIN	11.126	42,7	9.738	41,5	14,3
Research and Development costs	1.864	7,2	1.399	6,0	33,2
Commercial costs	3.456	13,3	2.495	10,6	38,5
General and Administrative costs	3.114	12,0	3.268	13,9	(4,7)
EBITDA before Stock Options	2.692	10,3	2.576	11,0	4,5
Stock Options	69	0,3	-	-	n.m.
EBITDA	2.623	10,1	2.576	11,0	1,8
Amortization, depreciation	512	2,0	401	1,7	27,7
OPERATING PROFIT (EBIT)	2.111	8,1	2.175	9,3	(2,9)
Financial income (charges)	(95)	(0,4)	(33)	(0,1)	n.m.
EARNINGS BEFORE TAXES (EBT)	2.016	7,7	2.142	9,1	(5,9)
Taxes	(625)	(2,4)	(524)	(2,2)	19,3
NET PROFIT CONTINUING OPERATIONS	1.391	5,3	1.618	6,9	(14,0)
Net Proft Discontinued Operations	838	7,5	2.006	20,6	(58,2)
NET PROFIT	2.229	8,6	3.624	15,4	(38,5)

TXT Retail Results reclassified among Discontinued Operations in 9m 2017 and 9m 2016.

Strong Balance Structure

€ thousand	30.9.2017	31.12.2016	Var
Intangible assets	7.419	7.634	(215)
Tangible assets	781	765	1 6
Other fixed assets	1.901	1.749	152
Fixed Assets	10.101	10.148	(47)
Inventories	3.787	2.767	1.020
Trade receivables	10.413	14.015	(3.602)
Other short term assets	2.730	1.954	776
Trade payables	(666)	(1.077)	411
Tax payables	(1.209)	(1.048)	(161)
Other payables and short term liabilities	(7.426)	(9.286)	1.860
Net working capital	7.629	7.325	304
Severance and other non current liabilities	(2.562)	(2.565)	3
Capital employed - Continuing Operations	15.168	14.908	260
Capital employed - Discontinued Operations	14.782	14.004	778
Capital employed	29.950	28.912	1.038
Shareholders' equity	33.146	34.283	(1.137)
Net financial debt	(3.196)	(5.371)	2.175
Financing of capital employed	29.950	28.912	1.038

• Share Price
• 31.12.2010: 1.51€/share (rebased for free share distribution)

• 16.1.2018: 10.20€ /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
• 2017: 0.30 € / share

TXT Market Capitalization (m€)