SeSa S.p.A.

Good afternoon, and thanks for joining SeSa group presentation. On behalf of Sesa, are participating Alessandro Fabbroni, Group CEO; Elisa Gironi, Corporate Governance and M&A Director; and myself, as IR and Sustainability Manager.

In the late morning, we made available on SEDAR website our first half 2024 corporate presentation that we may follow during the conference call. Today, our Board of Directors has approved the first half results reporting again an outstanding set of economic and industrial performance.

Alessandro Fabbroni will open the presentation with an overview of our first half strategic achievements.

Good afternoon to all of you for joining our call. Today, we disclose our 6 months results as of October 2023, with an outstanding improvement in digital skills, about 5,400 people, up by 21% year-on-year.

Revenues equaled to EUR 1.5 billion, up 14.5% compared to the prior half year. Once again, we improved double-digit our operating profit by expanding our 15-year consecutive long-term growth from 2010 as of today.

We continue to strongly overperform the IT market that now is expected to close year 2023, with a 2.8% annual growth. Thanks to our successful market position in the main areas of digital innovation for the business segment as cybersecurity, cloud, digital platforms and data science by combining technology business applications and consulting.

First half, 15% growth in revenues was mainly organic for around 65% with a double-digit contribution from any of our business sectors, each gaining market share from competitors. VAD revenues grew by 12%, sustained by a strong B2B system integration market position with over 80% of business deriving from enterprise software, cloud networking and green technology and less than 20% coming from physical technology without exposure to consumer segment.

System integration revenues were up by 22%. Thanks to the development of the main operating BUs, including digital, cloud, security, ERP software and vertical solution, data science by capitalizing our enlargement of the customer set from small and mid corporates to mid and large enterprises.

Finally, Business Services reported an outstanding 39% growth year-on-year driven by the development of proprietary applications and proprietary digital platforms for a customer set that reach over 500 banks, insurance companies and financial services operators. Also, thanks to the recent acquisition of 130 servicing leading Italian company in master servicing for securitization.

Consolidated EBITDA reached EUR 130 million, up by 21.3%, with consolidated EBITDA margin equal to 7.5% higher than 7.10% year-on-year. VAD EBITDA increased by 13.9%, achieving EUR 58 million with an EBITDA margin improving to 5.1% compared to 5% year-on-yea.

System integration EBITDA was up by 22%, achieving around EUR 46 million with an EBITDA margin equal to 12.3%, flat year-on-year while business services sector EBITDA reached EUR 8 million, increasing by 120% with an EBITDA margin at 14% compared to 9% year-on-year. Bottom line, group adjusted earnings after taxes achieved EUR 50 million, up by 9.1% and with an EAT margin equal to 3.3%, slightly decreasing year-on-year after net financial charges for around EUR 40 million compared to EUR 4 million year-on-year due to the increase of market interest rates and our delays in cash management efficiency improvement that now we are managing for the coming quarters.

We confirm a greater cash flow generation achieving an operating cash flow of around EUR 130 million last 12 months with 60% EBITDA cash conversion confirmed. Consolidating a financial position as of October 2023, was active.

That means net liquidity for EUR 153 million compared to EUR 189 million of the previous year. As a result of net working capital, slight grow from EUR 20 million to EUR 36 million, and in particular, due to M&A investment acceleration with over EUR 170 million investment and dividend distribution and buyback plan by around EUR 20 million over the last 12 months.

The first half under review, we significantly enlarged our perimeter of operation with 13 strategy bolt-on M&A is closed since January 2023, as of today, that contributed group's grow by around 35% in terms of revenues and operating profit with an outstanding 20% EBITDA margin of the combined perimeter of the M&As. Now I give the floor to Elisa Gironi as usual, will provide us another view around our M&A and integration programs.

Thank you, Alessandro. The external leverage continues to contribute in a significant way to our growth with a pace of 35% in the period under review, substantially in line with our historical track record.

Since January 2023, we closed 13 new M&As with about EUR 65 million revenue contribution expected in fiscal year 2024 and accretive EBITDA margin about 20% by onboarding 500 skilled human resources. We selected the target companies in the group strategic areas of development as security, cloud, digital platform, data science representing some of the main digital trends of innovation technology.

In the VA sector, after the start of consolidation of Altinia Distribuzione, reference player managed printing solution, with annual revenues equal to EUR 50 million. We launched the new business unit with the acquisition on July 2023, of Maint System.

Company with EUR 4 million revenues, EBITDA over 20% and 45 human resources focused on IT services and solutions for the printing segment. In SSI sector, we continue to improve our coverage on consulting, digital security and proprietary vertical applications.

On July 2023, we acquired 51% of Wise Security, company leader of cybersecurity Spanish market with expected annual revenues over EUR 10 million and EBITDA margin equal to 20% and 120 human resources. On October 2023, we acquired 100% of the TRIAS Mikroelektronik GmbH based in Germany and operating in electronic design automation software solutions with EUR 3 million revenue, EBITDA over 10% and 15% human reserves.

In the same month, we expanded our proprietary software solutions, thanks to the 60% stake acquisition of Soft System company with 15 skilled human resources, annual revenues of EUR 2.5 million and an EBITDA margin of about 20%. Finally, on December 2023, we closed our 13 M&As by acquiring the majority stake of Essedi Consulting Company with EUR 1.5 million revenue, EBITDA over 20% and 20 human resources focused on solutions and services on the Sap S/4HANA platform.

In business services sector, after the acquisition of the majority stake of 130 Servicing reference player in Italy in the master service for the securitization industry based in Milan with a team of about 130 people. Annual revenues for EUR 15 million and an EBITDA margin of around 20%.

We signed a partnership agreement with Gellify reference player in the innovation and digital transformation consulting to develop an open and finance platform for the wealth management. Thanks to the establishment of the 66 controller company data correction.

Thanks to its organic growth, the long-term agreements with some strategic partners and customers as Credit Agricole Italy and Banca Sella Group and integration of last M&As, our business services that target in the fiscal year 2024 revenues for around EUR 120 million compared to EUR 84 year-on-year, 800 human resources and about 13% percent EBITDA margin. We will continue to work on a wide pipeline of M&As in order to attract on an industrial basis, small mid companies with skilled human resources under a sustainable 5x EBITDA multiple evaluation with earnout mechanism and progressive receivable stakes acquisition to commit in the long term, the key people of the target companies.

Now I give the floor to Jacopo to provide an updated overview about our HR and sustainability path.

Thank you, Elisa. After a great improvement of our ESG performance on fiscal year 2023, in the first half SeSa Group strengthened ESG program and continue to increase the activities aimed at reducing its environmental impact and consumption of natural resources.

We also continue to constantly monitor all ESG growth dynamics and key sustainability ratings. We underline again the resin achievement of gender equality certification, the extension of the ISO 14001 environmental certification to the main group companies and in particular, the improvement of Morgan Stanley Compassing Index Score to BBB level, combined with increase of CDP rating to D level.

Thanks to our resin achievement, SeSa has been included among the top 7 companies in the ESG observatory developed by the University of Milan-Bicocca based on a panel of over 140 Italian-listed companies. In the first half, we also expanded our group ability to attract digital skills and human resources with about 5,400 skilled human resources, up by 21% year-on-year with about 850 new hires last 12 months as of October 31, 2023, of which 60% below 30 years old.

Our long-term growth and development trend driven by M&As industrial pipeline and our intensive recruiting programs. We improved by 50% our human capital compared to 2 years ago, and now target at least the line of 5,500 people at the end of fiscal year 2024.

To announce our loyalty rate, we continue to reinforce our welfare programs with wider and specific measure to support parenting diversity, well-being and work-life balance of human resources. Thanks also to dedicated programs in favor of diversity and inclusion.

We will continue to work intensively to develop our environmental programs by focusing on energy and natural resources efficiency and energy production for renewable sources to further improve our scores and drive out carbon neutrality agenda. We remember also that according to the resolution of our last shareholders' meeting as of August 28, we distributed in the month of September, a dividend equal to EUR 1 per share compared to EUR 0.90 per share of the previous year in the light of the strong set of financial results.

And we started our new buyback plan targeting annual amount of EUR 10 million. As we have just celebrated our 50 years anniversary from our foundation in 1973, it's great to share with our shareholders that we rank first among the top Italian performance with over 1 billion stock in the market capitalization from 2013 as of today.

According to the Italian Champions panel published by Equita, I reported last week on insolvent [indiscernible] Italian national leading finance newspaper. In the 10-year period under review, our total return was equal to 987%, the group's human resources went from 900 to over 5,000, revenues improved from EUR 800 million to around EUR 1 billion, carrying out over 75 industrial M&As.

Now I give the floor again to Alessandro for his conclusions.

Thank you, Jacopo. So after a 4-year period 2020-2023, of outstanding growth by improving revenues from EUR 1.5 billion up to EUR 3 billion human resources from 2,000 up to 5,000 people and EBITDA from EUR 75 million to EUR 210 million, we closed the first half of the fiscal year 2024 by reporting again a great set of economic results in line with our expectations and despite worsening market scenario.

We capitalize our competitive advantages and capability to gain market share from competitors in the phases of market acceleration. And we increased our main industrial KPIs with over 40,000 customers, of which 4,000 abroad.

15% revenue growth compared to 3% IT market trend and human resources that achieved a record line of 5,400 people, up by 50% compared to 3 years ago. Corporate and enterprise demand of digitalization confirms solid with higher focus on the most innovative areas of IT as cloud, security, data management, data science and generative AI in growing way.

These digital enablers are polarizing most of its investment and represents SeSa Group core focus of investments with a unique business model across Italy and Continental Europe by combining technology business applications and consulting. Considering our strong first half results, the contribution expected from the pipeline of M&A as well as our resilience and capability to outperform the market, we confirm the positive outlook for the full year 2024 with a renewed commitment on the targets already announced with consolidated revenues expected in the range of EUR 3.2 billion, EUR 3.3 billion and EBITDA increased in the upper of the range between EUR 240 million, EUR 250 million, growing around 20% year-on-year.

SeSa will continue to invest in the long-term development of digital skills, human resources and business application by leveraging on our strong competitive advantages reinforcing our role of reference player in the digital industry and generating finally sustainable value for our stakeholders. Thank you very much for your attention.

Now we stay available, as usual, for the Q&A final session.

Thank you, and good afternoon to everybody. I have 3 questions, if I may.

The first one is if you can provide us with an update on your current trading. We are aware that December is particularly significant.

So if you can comment on that and also in regards to the rest of the market. The second question is specifically on the business service segment.

Again, you confirmed the target of EUR 120 million revenues, I wonder if you can comment on your qualitative achievements and also about the marginality you are expecting because the quarter was particularly favorable for this segment. The third question is about the M&A pipeline.

You announced a large number of deals. What you expect in the next months in terms of size, in terms of regional area and in terms of skills you are targeting?

Andrea, thanks for the question. So first of all, the update on the trend of the business over the month of November and December.

Our operations went really well in line with our expectations. So the first half show our great capability to overperform the market.

Now we expect a significant improvement of the market trend, in particular, starting from January 2024, we expect an IT market growing by around 5% compared to 3% of the year that is closing as of December. So very positive scenario for us.

During the first half, we performed really well in the business segment of Base Digitale Group that I remember is coveraging the financial services industry. So that is a division we opened 3 years ago.

And going forward through several small business combination, we build up a new sector and now is targeting EUR 130 million revenue, so that is confirmed and in particular, it is confirmed our target to achieve a line over EUR 150 million, EUR 160 million so the year after 2025, with the same perimeter in terms of number of companies. I like that starting from May, we improved the perimeter of this segment, thanks to the business combination.

So the acquisition of the new company, 130 Servicing, that is a company leading in Italy in services digital platform providing for the industry of securitization that is a company that added EUR 15 million revenues at this division in that fiscal year with an average EBITDA marginality over the line of 20%, 25%. As for the M&A, Elisa Gironi, that is the head of the department may help us to provide some more details.

Thanks, Alessandro. About our past M&As, we are working on several targets in the area of the main digital trends like data science, digital engineering, business services sector, digital platform.

We are working on target that has a bigger size in terms of revenues and still human resources than in the -- that we made up in the past.

Actually congratulations for the results. I just had one question, mainly on the bank segment.

Could you please give some color on the demand environment? And yes, if you could give us some color on the demand environment given the -- maybe challenging or a bit more challenging macro.

So the trend of the demand in 2023 was characterized by a decline. So the growth rate that we achieved in 2022 after the COVID in 2020 was a trend of demand over the line of 5%.

Now in Italy, we are closing the year with around 2.8%. So we face down in physical technology.

In particular, we faced a slowdown in hardware because the hardware went down 6.9% in 2023 after a down of 5.6% in 2022. Now we are closing that 2023 year with a growth in Management Services over the line of 10% in software over the line of 1.2%.

For the New Year, we expect an acceleration. So with a growth rate over 6%, driven by Management Services really strong 12.4% improvement and software again, over the line of 3%.

In general, what we are serving is that the demand of digital services -- the digitalization is really strong, in particular, in the business segment. So that is the reference area, we are coveraging with the slowdown in the consumer segment.

So thanks to our great market positioning, we are moving forward. So we are really confident to be able to continue to grow in organic way, double-digit.

Okay. Thank you very much for -- again, for joining our conference call.

We would like also to invite you to our Investor Day that will be organized during the month of May 2024, in order to discuss our long-term strategic path and to have the opportunity to present to you our team and our Headquarters in Empoli, Florence. Further details will be provided at the beginning of the new year.

Thank you again, and we wish you, you and your family, a Merry Christmas.

Merry Christmas.

Merry Christmas. Bye.