SeSa S.p.A.

Good afternoon, and thanks for joining SeSa Group presentation. On behalf of SeSa, are participating Alessandro Fabbroni, Group CEO; and myself as our Sustainability Officer.

Today, our Board of Directors has approved the first quarter results of the new fiscal year 2025. And in late morning, we made available our corporate presentation on SeSa website that we may follow during the conference call.

Good afternoon, and thanks to all of you for joining our call. Today, we disclosed our first quarter results as of July 2024, with a strong improvement in digital skills, about 6,100 people and the resilient set of economic and financial results despite a challenging reference market.

After improving our size by about 2x in terms of revenues from EUR 1.7 billion to EUR 3.2 billion, 3x in terms of people from 2,000 up to 6,000, and EBITDA from EUR 94 million to EUR 240 million over the last 4 years period moving the consolidated EBITDA margin from 5.3% to 7.5%. We started a new fiscal year 2025 by confirming a growing trend and absorbing the decline of Digital Green sector.

In the first quarter of the new fiscal year, our consolidated revenues and other income grew by 1% year-on-year, while the operating profit increased by 1.5% and EAT adjusted by 0.5%. The Q1 consolidated growth was equal to 7% in revenues, 11% in EBITDA and 9.5% in terms of adjusted net profit excluding the Digital Green sector from the perimeter.

Digital Green were down by 49% in terms of revenue compared to Q1 2024 strong impacted by the extraordinary public incentives. Remember that the Digital Green sector started in 2021 as the acquisition of the company PM Service with EUR 30 million of initial revenues after the great revenue growth in full year 2022 and 2023 with EUR 370 million in revenues, driven also by government incentives.

The business declined in full year 2024 to EUR 250 million in revenues particularly in Q2, Q3 and Q4 2024, with the Q1 2024 still growing year-on-year. From the next quarter, that means Q2 2025, now we expect more stable trends in terms of Digital Green revenues and as a result, more favorable trend of growth revenues.

In the 3-month period under review, group revenues business unit of EUR 783 million and in particular, System Integration revenues were up by 16.5%, and thanks to the positive trend of the main operating BUs from cloud to cybersecurity, and data science. Business Services sector reported an outstanding 27% growth driven by the development of business application and digital platform for financial services industry and the recent bolt-on M&As, including ATS, company operating in the Vertical Application for capital markets.

VAS sector revenues defined excluding the Digital Green business unit from this perimeter, grew by 0.5% with the trend in line with the IT market distribution focusing on the Advanced Solution area that now representing about 80% of revenues. Digital Green sector revenues were down by around 49% compared to Q1 2024, strongly impacted by extraordinary public incentives as previously explained.

From next quarter, now we expect stabilization of Green sector results. Consolidated EBITDA reached EUR 56 million, up by 1.5% year-on-year, thanks to the focus on the emerging technologies and business segments enabling technological innovation.

The EBITDA margin was stable in the quarter to 7.2%. System Integration EBITDA was up by 6%, achieving EUR 25 million with EBITDA margin equal to 11.5%, compared to 12.5% for the previous year and 12% for the full year '24.

Business Services EBITDA reached an outstanding EUR 6 million, increasing by 90% year-on-year with an EBITDA margin equal to 16.4% compared to about 11% for the previous year. VAS EBITDA increased by 7%, achieving EUR 22.4 million with an EBITDA margin equal to 4.4% compared to 4.1% for the previous year, confirming its capability to consolidate margins in the challenging scenario.

Digital Green reported an EBITDA of EUR 3.1 million, down 58% with an EBITDA margin equal to 7% as of July '24 compared to 8.7% for the previous year, decreasing due to lower revenues. Bottom line, group adjusted earnings after taxes achieved EUR 26.6 million, up by 0.5% with EAT margin to 3.4%, stable year-on-year.

We also underline that in Q1 2025, net interest expenses and other financial costs were equal to EUR 7.8 million with a 6% increase compared to EUR 7.3 million of Q1 2024, due to higher interest rates year-on-year. At the same time we reported a strong improvement compared to EUR 12 million of Q4 2024.

That means saving quarter-over-quarter by 35% and compared to EUR 9 million in Q3 2024, that means the saving for about 15% that we achieved and to the cash management improvement. Now we expect additional improvement in the next quarters.

I closed my first section a presentation by giving the floor to Jacopo, who will provide us an overview of our M&A programs and ESG performance. Please, Jacopo, go ahead.

Thank you, Alessandro. In the fiscal year 2024, we closed 13 M&A that generated about EUR 150 million revenues with 70% EBITDA margin and with over 450 skilled human resources.

We started the fiscal year 2025 with 5 new M&As. In Business Services sector, we closed 2 strategic deals that are contributing to the group growth of the sector, building a unique software solution portfolio offering.

On May 2024, we acquired the majority stake of ATS, one of the leading Italian company in digital platform for capital markets with embedded AI technology to serve financial markets and traders to define customized strategies to support investment decisions and executions with annual revenues equal to EUR 14 million. This morning, we announced the acquisition of Metoda Finance, leading company specialized in offering software solutions for supervised financial intermediaries with over 200 clients, including some of the Italy's main banking groups with EUR 8.5 million revenues, EBITDA of about 30% and 70 human resources.

In SSI Sector, on May 2024, we closed the acquisition of Real-Time, company focused on business application consulting in SAP platform with 15 skilled human resources and revenues of about EUR 2 million and an EBITDA margin of about 12%. On July 2024, we acquired the majority stake of PV Consulting, a company with EUR 2 million revenues, EBITDA of about 10% and 15 human resources, focused on SAP consultancy in the human capital management area.

Yesterday, we announced the acquisition of the 100% of Boot Systems and LBS, company specialized in offering professional consultancy and solution in the cloud computing and data center area that jointly have developed revenue of about EUR 5.5 million and an EBITDA of about EUR 400,000 in the financial year 2023 with sustainable future growth targets. As usual, we selected the target companies in the group strategic areas as security, cloud, data, AI, digital platforms that represent the main digital trends of innovation technology.

And our typical deal structure is oriented as always, to the long-term commitment of skills and keep people of the target companies with 5x EBITDA entry value and the progressive integration within the group strategic business unit, up to the final manager. In terms of ESG path, we confirm our strong commitment to value generation for our stakeholders and we continue to invest in sustainability and environmental protection, supporting intensively our customers to be responsible on the management of natural resources enabling companies and organization.

Thanks to digital technologies to maximize efficiency and to develop the production for new resources. In the first quarter of the fiscal year 2025, we continue our long-term development of human resources, achieving 6,073 skilled people, up by 17% and a further improvement on loyalty rate.

We continue to reinforce our education, hiring and in particular welfare programs with wider and specific measures to support parenting diversity, well-being and work-life balancing. Thanks to the dedicated programs in favor of diversity and inclusion.

We also extended our main group certifications as Social International Standard, Gender Quality Certification, Environmental Certification, and United National Global Compact membership. Confirming at the same time, all of our ESG ratings as EcoVadis to gold medal, MSCI to BBB and Carbon Disclosure Project with a B score.

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

Thank you, Jacopo. The results as of July 2024 achieved in a challenging scenario confirm our resilient path and capability to invest and support the SeSa group industrial development and the focus on group value-added business from cloud to cybersecurity and data science, we extended our growth trend by confirming our profitability margins stable in the quarter, both in terms of EBITDA and EAT margin.

We continue to move forward by investing in the long-term development of skills and business application and supporting our stakeholders in the face of innovation technology wave of great relevance as AI adoption provided for any company and organization. Our job in transforming and evolving group organization to double-digit growth and EBITDA margin sectors as System Integration and Business Services is in progress by consolidating at the same time our leadership in the VAS sector.

The recent acquisition of the company Metoda Finance reinforce our market position and software offerings, the financial services industry, where we are building a market leader as Base Digitale Group with over 700 customers, 1,000 people and EUR 150 million revenues expected in the full year 2025. We closed a resilient first quarter, growing double-digit in Software and System Integration sector and in particular in the Business Services where now we target an annual growth of 40% year-on-year and by absorbing the downturn of Digital Green, where we expect a more stable trend starting from Q2 2025.

In the line of the resiliency and growing focus on added value areas of the market we confirm the guidance for the full year 2025 as we expect a growth improvement of our revenues and profitability starting from Q2 2025 compared to Q1, in particular in the second half for the full year when we will benefit of less tough comparison the previous year and the new improvement of IT demand as forecasted by the main market analyst. Thank you for your kind attention.

Now we stay available as you go for the final Q&A session.

I have 3 questions. The first one is on the guidance.

You have just confirmed the guidance. I wonder if you can comment some -- you can add some comments in light of the results you just presented and also the recent acquisition.

The second question is about a clarification on the Digital Green. You have provided some interesting data on the presentation.

I wonder if you can comment on the seasonality quarter-by-quarter that you recorded last year in order to have a better understanding of what we can expect this year in the next quarter in terms of comparison. And the third question is about the actions you are implementing in order to reorganize your group structure.

And so if you can update us on this program. And also, if you can remind us if the attrition rate and the net hiring targets are concerned for this year?

Good afternoon, Andrea. Thank you for the question.

So first of all, our guidance for the full year has been confirmed today, considering that our growth without Digital Green is equal to around 10% in terms of profitability growth and higher than 7% of revenues. That is a guidance consistent with the trend of the rest of the business with a 15% growth in Software and System Integration and around 30% growth in the Business Services.

As for the Digital Green, we remember that last year, for the full year 2024 was characterized by a growth trend still in first quarter and a great decrease around 30%, 40% decrease starting from the Q2 2024. So that means that last year, the trend of revenues was more or less $85 million in Q1, $50 million from Q2 every quarter up to Q4.

So starting from last year, we are stabilizing our revenues about EUR 45 million to EUR 50 million. That is every quarter, that is a result of a strong reduction of prices that now is stabilizing, and we are confident to be able to face less staff comparison starting from Q2 when as a result, a positive effect on our group consolidated revenues and profitability.

So finally, the trend of our group structure, we are growing in sector as Business Services and System Integration with higher level intensity. So that is the reason we continue to grow in labor.

We improved by around 15% of our people as of July 2024 year-on-year. That is the effect of more or less 1,000 gross hiring -- internal hiring.

We are working with an internal rate that is producing at 6% -- 6.5%. It is very positive for our industry.

So we are confident to be able to continue to take under control this attrition rate to improve -- slight improve.

So I have 2. The first one is if you could give us a bit more color on the trend within the VAS sector, particularly which segments?

Or was it hardware that was maybe a bit slower or software that was maybe lower? And then the second question is should we expect Digital Green to become kind of a full stand-alone segment in terms of reporting wise from now on?

Thanks for your question. So first of all, the trend of VAS that we reported net of Digital Green in order to underline the industrial trend, the pure trend of IT was characterized by a stable trend with low single-digit growth in Advanced Solutions, that means in particular data center security and software and low single-digit decline in the rest of the business, that means that volume technology.

So the decision to report in a separated way. Digital Green was driven by the opportunity to disclose as best as possible.

The trend of business unit that in the last 2-year period was strongly impacted by price fluctuation and also public incentives. Now we are confident to be able to drive a stable trend of revenues and to recover a more industrial trend with the sustainable and ordinary way of the business also due to most of public incentives expired.

And so we are in front of a business more sustainable. So that is the reason we plan to continue to disclose and to report in a separated way this business unit, so Digital Green one compared to VAS.

Two questions from my end. The first one is on M&A.

So you finalized some M&As over the last quarter. So just can you provide some details on how much the growth in this quarter was contributed by new deals by M&A?

And what is the contribution of M&A in the guidance you confirm for fiscal year '25? And the second one is maybe on the free cash flow and the net financial position.

So maybe if you can provide some details on the bridge net financial position, they reported a negative EUR 25 million, the building blocks, free cash flow, CapEx and maybe M&A spending?

Thanks for the question. So we have just closed 2 significant M&As in the last 24 hours.

One in the Iberia Peninsula with the acquisition of 2 companies in the System Integration. And another one this morning in the area of Business Services that is a really good company with around EUR 10 million revenues in the software with a 30% EBITDA margin and great customer set and that will become part of Base Digitale Group by contributing to create a group business sector really strong that now is targeting EUR 160 million revenues, up 40% year-on-year and with the EBITDA margin higher than 15%.

So in our guidance, more or less the contribution from M&A is continue to be about 30% of the growth in the first quarter. The M&A contributed about 30% to the growth of System Integration sector and Business Services sector.

So the 2 business sectors that are growing, while we don't have any M&A in rest of the perimeter. In terms of the trend of net financial position, we reported down by EUR 13 million, from EUR 11 million net debt to EUR 25 million of net debt in terms of net financial position reported while considering the cash -- the pure cash and bank account financial position, we have down by EUR 24 million from net cash of EUR 208 million to net cash of EUR 184 million.

We estimated a cash flow of around EUR 140 million over the last 12 months, considering an EBITDA of EUR 240 million taxes for about EUR 35 million, financial charges for about EUR 35 million, ordinary CapEx equals to EUR 30 million. In the last 12 months, the M&A investment totaled EUR 85 million and the CapEx around EUR 50 million, of which ordinary CapEx EUR 30 million.

We have also distributed dividends and make buyback plan for about EUR 30 million over the last 12 months.

Just one question on the cash management and the factoring and the liabilities management. So we have seen a quite significant improvement versus last quarter.

Could you maybe provide some more elements to how you achieve is better results in cash management and what we can expect also in the next quarters, given also a decrease in interest rate in European central banks and then so the corresponding rate will go down in the next quarter. So maybe some more elements from you on the action taken in order to achieve this significant improvement?

Marco, thanks for your question. That is interesting for us.

So it is clear that the last quarter results, I mean, the Q4 of 2024 was really disappointing for the market, we work a lot. First of all, we collect in the Q1, the first effect of our improvement of cash management.

In fact, we reduced a lot to the interest expenses on current accounts. We improved also the positive interest from active current account because we renegotiated with our banks that condition.

On the other end, we have some opportunity to continue to reduce because in the Q1 of 2025, the average level of Euribor tax rate continue to be higher by 10% than level of Q1 of 2024. So now in Q2, we will benefit our lower level of interest rate.

So that means by combining the lower level of Euribor with our action of cash management, we may drive results in terms of reduction of interest expenses and other financial costs higher than our guidance. I don't know if my answer is okay or complete from your point of view.

Given that you now disclose separately the VAS division and Digital Green. Could you tell us what is the normalized EBIT margin of each division?

And many thanks for the question. So we highlight not only the quarter results by sector but also the historical trend in our presentation of the last 5 years period.

And so we consider a 4.5% EBITDA margin sustainable in VAS and the 7% to 8% the EBITDA margin stainable for Digital Green in coming quarters in coming years. We reported in the past 8% to 9%.

Yes. Okay.

Yes, concerning previous questions. So it's very clear -- it was very clear.

So for concerning first quarter was essentially cash management, so the action we've taken, but even compensate the higher average interest rate versus the quarter last year, and from this quarter, current quarter, next one, we will also add a decrease in interest rates. Is it clear to me?

So I have another question more on the -- on your international development. Can you maybe give an update on the main international marketing where you're present?

What trends do you see in this market? And what is your strategy outside Italy for this year and the years ahead?

Thanks for the new question, Marco. So we are building an international presence starting from 2020 by focusing, in particular, on Central and Western Europe.

So that means the countries are Spain, Germany, Central Europe and France. In particular, we are achieving significant coverage in the German market with higher than EUR 50 million revenues and 200 people and Spanish market with over than EUR 30 million revenues and about 200 people.

Inside Software and System Integration, the internationalization is strategic in order to obtain a full coverage of European manufacturing areas considering that we have some business unit that are completely international, in particular, the industry 4.0 and the cybersecurity. Particularly in the cybersecurity unit of Software and System Integration, we have about 60% of people that are located outside Italy, in particular, in Germany, Switzerland and Spain.

And so more people outside Italy than people based in Italy. So that means we are working in a progressive way to be international across Central and Western Europe.

So we thank you very much any the participant to our call. And as usually, we will available with our team of IR and Jacopo for any additional information.

Nice evening, thank you very much.