Earnings Call: Q1 2021

May 14, 2021

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the doValue financial results to March 31st, 2021. Due to a technical issue, only the audio portion will be heard through the webcast. We kindly ask those connected via webcast to download the slide presentation on the doValue website in the investor relations section. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing Star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Daniele Della Seta, investor relations of doValue. Please go ahead, sir. Good morning, ladies and gentlemen. Welcome to doValue's Q1 2021 financial results presented by our CEO, Andrea Mangoni, and our Group CFO and General Manager of Corporate Function, Manuela Franchi. Andrea will take you through the highlights of Q1 and comment on the latest business environment and developments before handing over to Manuela to dig further on our financials. Following the presentation, we will be glad to answer your questions. Let me pass it over to Andrea. Please, Andrea. Thank you, Daniele. Good morning, everyone, and thank you for joining us today. I hope you and your families are well and safe. One year ago, when commenting on Q1 2020 results, we were facing a very uncertain business outlook as we were heading to uncharted territory. Fast-forward today, we are seeing light at the end of the tunnel as the global vaccine rollout is moving us much closer to a post-COVID world and the return to normal life. As a company, we came out stronger and bigger than one year ago with a wide pan-European coverage, a sound balance sheet, and a resilient business model. We know that this is a very important quarter as you will try to look for back to normal signs. As usual, we will guide you through our financial results with relevant comments on the most recent business developments. We will begin with a look back at our performance in Q1. After a challenging 2020, which saw doValue weathering unprecedented disruption of its business, nevertheless posting satisfactory results, Q1 is now showing that the normalization of collection started in second half of 2020 is gaining strength, with gross revenues at EUR 124 million and EBITDA at EUR 36 million in the first quarter of 2021. With a strong growth year-on-year respectively of 47% and 83%, driven by the consolidation of doValue Greece and a pickup of the collections activity, which was severely impacted in the last 15 days of March 2020. We are particularly proud of the result of doValue Greece, which is showing better than expected collections and higher profitability than buy-side case. Net income is also growing along with EBITDA, despite higher D&A and financial charges related to acquisition, highlighting the financial sustainability of our M&A strategy. 2020 has been one of our best year record for AUM growth, leading at a record high GBV of EUR 158 billion. As the extraordinary measures to sustain the economies will be lift off following the economic recovery, the weakest sector and segments of the economy will be still struggling to cope with an uneven recovery, and the banks will address promptly any rise in their NPE ratio, which had been artificially kept low in 2020. This is why we continue to grow organically in Q1 with the onboarding of the Project Icon portfolio for EUR 2.6 billion in Greece and the addition of EUR 2 billion of new mandates across several countries and asset classes on track to reach target of EUR 7 billion to EUR 9 billion for 2021, and I'm personally extremely positive on this target. On top of this, our forward flow contracts across four countries continue to underpin our asset under management, adding further 1 billion of GBV, which represent 50% of the target of the year. After accounting for collections, write-off, disposal, and signed mandate to onboarded, Q1 is ending with over EUR 161 billion. Balance sheet and cash flow have also come out stronger and stronger from this quarter. Despite a very positive dynamic of net working capital in the last quarter of 2020, cash generation continued to be strong in Q1, even after a partial reversal of net working capital and low seasonality. In fact, operation generated EUR 19 million, and the net debt was reduced by EUR 34 million. Also thanks to divesting of financial activities related to our co-investment strategy. This led to a further decrease of our leverage ratio from 2.7 times to 2.5, even with the unfavorable LTM EBITDA, which now includes 12 months of COVID. As you may recall, we announced in the last call that BOD had resolved to propose a dividend distribution of EUR 20.8 million to the shareholders meeting. The latter has approved the distribution on the 29th of April, which can be now considered certain, also in light of our better than expected deleveraging course. Following up on our M&A strategy, I'm also pleased to announce that we have closed our first deal in the fintech ecosystem with an investment in a Series A round of a Brazilian fintech startup, which we think will be very interesting and promising because it has an innovative technology for the recovery of unsecured loans, which can be successfully deployed outside Brazil. It's a small but important investment, of course, we still have enough headroom for other diversification opportunity across growth sector such as fintech, big data, and proptech, while also considering a potential deal for in-market consolidation. Moving to key financial figures on slide four, you will notice how the post-COVID recovery is consolidating with a solid growth in both revenues, EBITDA, and net income. Gross revenues were up 47% to EUR 124 million. While year-over-year is benefiting from comparison with a quarter which in March 2020 did not include doValue Greece. Even pro forma first Q 2020 for the acquisition, results are showing an interesting trend with gross revenues down only 10% in Q1, only a slight decline versus Q4, which benefits from peak seasonality effect. Normalization of business condition also means a lift-off of some extraordinary cost reduction measure in 2020, which allowed the company to limit the decrease in profitability, which comes naturally with lower volumes in a business characterized by high operating leverage. We are happy to be back to pay full variable compensation to our asset management. Nevertheless, this has not prevented us to reach a very satisfactory EBITDA of EUR 36 million, with an EBITDA margin at the same level of a full year 2020. As collection will grow further, leading to seasonally stronger quarters, we think this is a solid base to reach pre-COVID profitability level. Also, the net income items has grown significantly, swinging from a negative result of EUR 0.7 million to a profit of EUR 5.5 million, despite higher financial charges and D&A originating from our acquisition. This is thanks to our healthy approach to M&A with financial sustainable and accretive acquisition, even with a very conservative approach when it comes to purchasing price allocations. On page four, we want to give you some clues on the ongoing normalization process of our collections operation. In the left part of the chart, you have monthly collection for 2019, pre-COVID, 2020, affected by COVID in March, and 2021 in Italy and Spain. Greece has been excluded, being difficult to have constant and comparable perimeter within that time frame. March 2021 collections in Italy and Spain were up 38% and 82% respectively comparing to March 2020. The same are down 7% and 9% comparing to March 2019 pre-COVID months. Consider that GBV in 2021 was slightly lower, that both Spain and Italy have been affected by restriction measures in first Q 2021 to contain new COVID waves, pending rollout of vaccination campaigns. This is a remarkable result, which bodes well when we will have a full reopening, hopefully by this summer. As we mentioned several times, subdued collections in 2020 are not lost and will add to the backlog and GBV to be collected once court activity will be back to normal. On this, we show on the right part of the slide a chart plotting for each month the number of awarded real estate court actions against a baseline of 2019. As we have shown in our last analyst call, this important ratio was at -40% to -50% in the fourth Q 2020, recovering from -80% to -90% of second Q 2020. In first Q 2021, the recovery trend has been unaffected by the imposition of new lockdowns in the context of new COVID waves, and stands now constantly above 40%, heading towards -30%. On page five, we show a focus on the new AUM coming from forward flow and new servicing mandates in Q1. Having closed the 2020 with a solid EUR 4.3 billion coming from our forward flow contracts, we forecasted a conservative target of EUR 2 billion for 2021 to account for moratoria and other debt relief measures still in place in our markets, who lifts off and effect are not predictable yet. First Q ended with forward flows at EUR 1 billion, half that target, highlighting how sign of distress are still lingering in the economy after an uneven recovery. In fact, the shock caused by COVID will have long-lasting consequences for the industry, and we are seeing our major clients keeping on carry out their de-risking process with important transactions. Being number one in Southern Europe with top service ratings and having a diversified client base with the top NPE and real estate investors in the region, doValue is ideally positioned to be involved as servicer in the upcoming transaction. First Q 2021 ended with a solid intake of EUR 2 billion of new mandates and the onboarding of the Project Icon portfolio for EUR 2.6 billion, making the target of new mandates of EUR 7 billion-EUR 9 billion for 2021 achievable. New GBV was evenly distributed across countries and asset class. We are particularly proud of the FSO fund, a first corporate multi-bank UTP mandate in the market, which is proving a flexible platform for future waves of UTP from both founder banks and third parties bank participating to the fund. When it comes to innovative deal structures, doValue has been able to consistently affirm its market leadership. This is why we are present in the most important bids in Europe. The pipeline for servicing mandate is still solid across all market with a few large mandates we are already working on, especially in Greece, Italy, and Cyprus, and several mid-size ones in Spain. The most interesting announcement will be in the second half of the year, when the most important mandates will complete. Moving to slide six, I would like to point out how the positive cash generation feature of 2020, which is resulting from a shift to professional investors and consolidation of doValue Greece. Is consolidating further with Q1 operating cash flow standing at a record high, EUR 19 million, and net cash flow in Q1 stood at EUR 34 million, bringing our leverage ratio on a pro forma basis to 2.5x with EUR 376 million debt. This is considerably better than our year-end 2020 expectations for a slight increase of leverage ratio in first Q2 2021, shifted toward a further decline. This allow us to support both our dividend policy and our M&A strategy while keeping a strong liquidity position. As per M&A, we confirm what has been stated in last analyst call. A very prudent approach considering big deal only if they are accretive EPS-wise, leverage within a three-time limit on a year basis, and a new focus on diversification in higher growth contiguous sector such as fintech, proptech, and big data. On this, I'm glad to announce our first investment in fintech with a Brazilian fintech startup named QueroQuitar. In slide seven, we would like to give you more color on this acquisition for you to understand our M&A strategy in adjacent higher growth sector as we try to balance diversification with focus on core operations. QueroQuitar is a Brazilian startup located in São Paulo, established in 2017 and initially seeded by top-tier institutional investors such as the American Acceleration Program, 500 Startups, and the corporate venture capital arms of Telefónica. QueroQuitar is a user-friendly digital platform for debt negotiation. It was created to bring debtors back to becoming consumers. Via the platform, debtor are invited to negotiate their debts with amicable condition offered by creditors. QueroQuitar also offer financial education and provide tips and information to help consumers with financial planning. QueroQuitar operates in the Brazilian NPL market, with an advanced digital marketplace for the renegotiation of small unsecured tickets, which connect debtors and creditors in a seamless way with a full digital end-to-end journey. The company has grown revenues 4.6 times in 2020, topping EUR 1 million, thanks to contracts with top-tier banks and corporation in Brazil. Not only this company has found a smarter and efficient way to service a small unsecured ticket without expensive and work-intensive call center operation, but their process has proved less stressing and friendly for the debtor while increasing overall collection rates. doValue's investing in a Series A round EUR 1.5 million, acquiring a 10% positioning itself as the main financial shareholder, along with BR Startups multi-corporate venture capital fund invested by Microsoft, Bayer and Qualcomm. Before you ask, no, we are not entering directly in the Brazilian market, although we think this is a growing and huge market of over EUR 80 billion for unsecured NPLs. We will support QueroQuitar in the execution of their business plan since we think this is a good investment and a safe way to gain exposure to the Brazilian market with limited financial and operational risk. At the same time, we will partner with QueroQuitar as we will try to import their unconventional recovery strategy in Europe. This could pave the way for doValue to enter in other segments of credit servicing, which we overlooked in the past because of low margin and work-intensive operations. Also, I would like to stress that this deal has been sourced and executed with internal resources. Stay tuned for other deals of this kind. Before handing over to Manuela, let me spend some word on our ESG policy and recent progresses. As company which play a central role in ensuring a smooth functioning of the banking system and an healthy transmission of the credit to the real economy, we are aware, doValue has also a duty to leave a positive mark on broader society. This is why, in this very challenging moment, we remain committed to be the engine of sustainable and inclusive growth. Among other initiatives, the group has strengthened the dialogue with employees, customers, investors, shareholders, and public institutions in order to guide its strategy and achieve in all country where it is present, initiative for the benefit of the community, supporting the sustainable development of the credit systems, thanks to its typical activity. The culture of sustainability, which has always been part of the activity of doValue, is based on integrity, responsibility, and respect for people, aiming on long-term shared value creation. You can go through the details on ESMG on page eight. Let's now move to the financial review, leaving the floor to Manuela. Over to you, Manu. Thank you, Andrea, and good morning, everyone. We are pleased with these results, which went over our expectation and show a consolidating recovery path towards better times. With its distinctive internal capabilities for credit management, coupled with its focus on Southern Europe and diversified portfolio under management, doValue is ready to fully benefit from a post-COVID environment, when the financial system will have to deal with the strains left by the COVID in some sectors. In 2021, GBV reached EUR 161 billion, making us the clear number one in independent servicing in Southern Europe. GBV growth has been balanced across all countries and asset classes, and together with an interesting pipeline of bids, is consistent with our targets of new business flow for the full year. Gross revenue are up 47% to EUR 418 million, sustained by continuous normalization collection and a larger consolidation perimeter. The cost base is increasing due to the larger perimeter, including doValue Greece, but it's lower on a relative basis, thanks to the ongoing cost reduction program. EBITDA ex NRI reached EUR 36 million, with a +83% growth year on year, and an EBITDA margin of 29%, up from 23% of the first Q, and in line with the whole EBITDA margin of 2020, despite seasonality weakness in Q1. Bottom line is healthy with net income ex NRI at a positive EUR 5.5 million, driven by higher EBITDA and partially offset by higher D&A and financial charges. On D&A and bottom line, let me remind that we allocate much of our purchase price to the SLA contracts, which depreciate in a predictable way, and this is a non-monetary item, was EUR 13.3 million in Q1 2021, out of the total D&A of EUR 18.9 million. Our SLA contracts arising from PPA represent over 200% of generated goodwill on balance sheet, while in other competitors with a similar M&A strategy than doValue, the same ratio stands at just over 10%, with much of the PPA put on goodwill, which undergoes impairment tested each year. We added a dedicated slide in appendix to better explain this item, which although not having any monetary impact, is having a growth impact on our bottom line. Cash flow generation continued to be strong, with a EUR 34 million, despite an unexpected reversal of the positive networking capital dynamic. This is normal in Q1, following advance payment cashed in in Q4. Deleveraging has been above expectation with net debt to perform EBITDA on a reported basis limited at 2.5 times from 2.7 times at the end of 2020. On page 11, we describe the moving parts of our GBV. On the positive side, we have added EUR 1 billion of GBV from forward flow agreement, automatic transfer of NPL in earlier years coming to us each month from our four main banking partners. A precious and defensive feature of our model, at 50% of our EUR 2 billion target for the full year, despite the extension of the moratoria and measures to support the economy in Europe. Q1 2021 also ended with a solid intake of EUR 2 billion of new mandates and new boarding of Project Icon for EUR 2.6 billion, making the EUR 7 billion-EUR 9 billion target for the full year achievable. New GBV was evenly spread across country and asset classes. EUR 1.1 billion in new NPLs in Spain, coming from Spanish banks. EUR 0.7 billion of new mandates in Italy, of which a portion from UTP, and EUR 0.2 billion in the Hellenic region. Collections were at EUR 1.3 billion, picking up pace in the third quarter, while write-offs were at just EUR 0.3 billion, and sales by banking clients at EUR 3.0 billion. In conclusion, Gross Book Value under management continues to develop positively, topping EUR 162 billion, when including signed mandates to be onboarded. On the following page, we summarize the key certification of our AUM. Year after year, we achieve greater diversification by market, asset class, and client, while maintaining the distinctive features of being one of the most secured corporate portfolios in the industry. We now cover all the most attractive markets in Europe, while also being diversified. Italy is under 50% after the recent developments in inflows. In our client base, you find the top systemic banks and investors in the region. This should translate in the ability by doValue to capture a significant portion of new mandates in the market. On page 13, we look at the main components of revenue. On the left-hand side, outsourcing fees are down compared to first Q as a result of the cost reduction strategy and the inclusion of doValue Greece in the consolidation perimeter. On the right-hand side, we highlight the key point of our business model. Base fee are up more than 1.4 times in absolute terms compared to the first Q 2020, thanks to the inclusion of doValue Greece, and slightly down from 37%-36% as a percentage of total gross revenue. Comparing base fee of first Q 2021 with fourth Q 2020, which had a constant perimeter, we have slightly improved in absolute terms for EUR 1.3 million and a significant increase in relative terms from 31%-36% because of lower variable fees due to the seasonality effect. Thanks to our exposure to markets such as the Iberia region and the Hellenic region with much higher average fees, the base fee component is now a significant part of our P&L, with smooth volatility not only in downturn period, but also along seasonally different quarters. On page 14, we focus on operating expenses. We have built an operating platform based on skilled asset managers and a scalable IT platform, meaning that our cost base is mostly fixed with a high degree of operating leverage. In 2020, collection subdued by limited court activities for lockdown, and work from remote pushed us to look for sources of efficiency deeper and quicker. Now that collection volumes are normalizing, we can deploy operating leverage with a slicker platform. On relative terms, every cost item has reduced comparing to first Q 2020. HR costs are growing slightly as percentage of gross revenue comparing to fourth Q because of lift-off of some extraordinary cost measures, like state support aids and lower bonuses. A lower collection for the seasonality effect. That is why variable HR cost as a percentage of total HR cost grew from 7% in the full 2020 to 13% in the first Q. As mentioned by Andrea, this is a healthy dynamic and one more sign that things are going back to normal. As well, our outsourcing partnership with IBM is continuing to yield its results, implying lower IT costs. On slide 15, we show the main results by geographic area, although Andrea already commented on the monthly collection. Collection rates on LTM basis continue to increase in 2021, following up on the recovery trend started in the second half of 2020. Stock collection rates for the full group increased in the first Q from 3.1% to 3.3%. Please note that the data on the stock collection rate is impacted by the inclusion of Alpha portfolio in Cyprus of EUR 4 billion, which is now computed as stock GBV and present a structurally lower collection rate comparing to other portfolio in the Hellenic region. At constant GBV, the collection rate for the Hellenic region would have been 11.8%. One key element stemming from this slide is the accretive contribution of doValue Greece to group margin. In the region, we are already at 46% EBITDA margin, continuing to grow profitability in line with our acquisition business plan. Next, the working capital and balance sheet on page 16. Working capital has increased slightly by about EUR 5 million in Q1, lower than expected due to concentrated advanced payment at year-end. Net of this effect, our operation continued to show very low net working capital due to structural client shift to our investors and by international expansion in Greece, where a portion of our fees are prepaid. Regarding net debt, I would highlight that leverage is developing even better than our expectation in this quarter, and that the current covenant set provides for room to manage adverse scenarios and allow the dividend distribution resolved recently by the shareholder meeting to happen. Our sources of funding are well diversified between the bank and the bond market, with limited near-term cash outflows and no refinancing needs. Debt investors are appreciating our strong balance sheet position and cash flow generation, pushing our 2024 5% non-call to bond issued last August to trade at 106, with yield to maturity of 3.5%. Finally, comment on net debt on page 17. Just highlighting our healthy cash flow generation at EUR 87 million. Capital expenditures stood at nearly EUR 3 million, in line with the expectation and historical average in relative terms to our sale. We have already talked about net working capital. As anticipated in our last call, net debt at year-end 2020 was negatively impacted by co-investment of EUR 21 million in notes issued in the context of a leasing securitization, for which doValue was appointed special servicer. We divested this note with a corresponding positive impact of EUR 21 million on the financial asset, plus a capital gain of EUR 4 million included in the reported EBITDA. These items includes also other investment, which are beginning to invest us for EUR 1 million. We have now finished with the presentation. We thank you everybody for the attention. We leave the space for your questions. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Giulia Aurora Miotto of JP Morgan. Please go ahead, madam. Good morning. Thank you for taking my questions, and thank you for the presentation and also the additional detail that you provided, which is appreciated. I have a few questions, and I'll ask them one by one if that's okay. The first one is on costs. When we look at the remaining three quarters of the year alone, it looks like consensus currently expects about 28% net revenue growth, but only 8% cost growth. How do you view this? Do you think this is a reasonable trajectory to assume, or should we be factoring in perhaps an acceleration in cost growth in line with the variable costs now coming back to normal, or any other factors? As mentioned in the past, we feel comfortable with the consensus in terms of net results. This could be driven by eventually a higher revenue contribution, a higher cost contribution compared to the value you have mentioned. Because take into account that on the cost side, 2020 has benefited from the measures we highlighted in the past, which were, especially on the HR side, exceptional, which were the state support aids and also the very limited variable compensation. Obviously we will bring those items to normalization, while on the other cost items, we continue to reduce costs on a share amount. That's why on a pro forma basis, costs have decreased. Also we continue with our plan of decreasing the number of employees to increase efficiencies. We have a cost exit plan, which you can see the impact in the charges below the EBITDA, which tries to rejuvenate also the workforce and improve the productivity of the remaining employees. Thank you. Is it possible, could you quantify the effect of the state benefits that benefited 2020? It was around EUR 2 million. It was only for Italy. Other countries do not have this benefit. Understood. Thank you. The second question I have is on QueroQuitar. Considering this is a completely new region and segment, could we take this investment as an indication that maybe you're looking to bring this kind of exposure and business to Europe in terms of maybe growing into small-ticket consumer loans? Not really. We see this opportunity more the technological angle that they bring and the new way to approach a segment of the market that we know very well because we manage these tickets. It's not where we focus our attention because we tend to outsource the management of unsecured tickets. You can see from chart on page 12 that a portion of our book is also secured, 27%. It means that we really believe in this new approach to this asset class. We think this technology can be brought also in the countries where we are present. We not necessarily want to grow our business there. Also take into account that calendar provisioning will have a positive impact in this segment in all of Europe. Therefore, the current players in this segment will require new ways to manage it in a very efficient manner to extract as much as possible from the servicing of those portfolio. With this in mind, we have decided to take the investment we described. Thank you. That's very clear. We really believe the impact of this technology on the profitability of the small loan segment can be disruptive. Is this something that could help with the outsourcing fees reduction as well, perhaps? Yeah. Did I understand that correctly? Yeah. Okay. Yeah. Okay. Understood. The final question I have is on non-recurring items. There's a small amount above EBITDA, and then there's some amount below EBITDA. I was just wondering if you could provide some guidance on these, more detail and maybe outlook for the year. I'm just curious why, for instance, the gain that you had in the quarter isn't classified as a non-recurring item, but some of the other things like restructuring when it comes to doValue Greece consolidation is non-recurring. Thank you. David. Basically, we don't put the restructuring cost as extraordinary, these are all operating costs. We think that this approach is conservative because we are not trying to adjust for the reorganization effort we did both for Altamira and for Greece. What we are including is just the effect of the transaction, the exceptional M&A effort and the impact of it, which has over time. For example, some of the legal costs we are still expensing now. Some of the consulting efforts on the PPA side related to the acquisition we are expensing now. These are pretty much the adjustments for the EBITDA. Last, the merger of doValue Hellas. You might remember that we had a small company in Greece, which was set up before doValue Greece. Because we want to have only one platform there to extract as much as possible synergies from the combination, we are merging doValue Hellas into doValue Greece. To highlight that these are all the M&A extraordinary costs. Below the EBITDA, the only NRI are related to the redundancy expenses, which are a part of our 2020, 2022 business plan, and which I mentioned before. We have a continuous effort to reduce the workforce with incentives so that we can improve the productivity of the remaining one and to do more with less people. Is there any idea, could you give us any idea of what the progression will be through the year? Should we expect more of these redundancy expenses in the following quarters? On the EBITDA side, it's really marginal because unless you do other transaction, we are just consuming the cost of the previous transaction. On the below EBITDA, it will be mostly related to the continuous effort. We have a concentrated program in the first Q, which has completed. The second part will be much lower in terms of redundancy packages. Thank you very much. That's it for now. Thank you. The next question is from Borja Ramirez of Citi. Please go ahead, madam. Hello. Good morning. Thank you very much for your time and for taking my questions. I have a couple of quick questions regarding the outlook. Firstly, regarding the indications that COVID has caused a delay in the 2020 collections, do you have any indication on when these delayed collections could be potentially recovered? Maybe the second half of the year? My second question is if, during the year 2021, it seems based on the solid inflows of Gross Book Value that have been observed so far, and also the earlier comments that the most important mandates would come quick in the second half of the year, it seems the Gross Book Value may show some growth year-over-year in 2021. I would like to ask if you could maybe provide some indications on the potential growth rate of the Gross Book Value. Thank you. If I can proceed. Yes, Borja. In terms of effect of COVID, given also the measures on moratoria, but moreover, the most important measure for the recovery are two things, which are the decisions related to the real estate auctions in courts, which for the first half, they're still blocked in some of the relevant countries, like Italy and Greece. In theory, they should finish by June, but it all depends on the political decision and also the real estate prices. For this reason, and the uncertainty around those, probably the collection of last year will be recovered in the fourth Q and the first half of 2022. Why they are important? Obviously we can continue to collect through the courts, but if one of the measure is to sell the underlying property, and for the first houses, you are not allowed, but you have to pursue only an extrajudicial settlement. You can see that obviously you reduce the options available. Still, obviously, we pursue this option, but the more you have, higher is your recovery. Real estate prices are expected to recover well from the signs we are seeing, but still is on the upward trend back to the old levels. On the external growth of the company, I'm quite positive this year because we see a significant increase in the flows from the existing clients, despite the moratoria. We really believe the new flow will increase even more in the last quarter of this year. On the stock side, banks are significantly accelerating the de-risking plan to anticipate the impact of the moratoria itself. Our current pipeline is extremely strong, and I think our current guidance, EUR 7 billion-EUR 9 billion AUM growth this year could be conservative. Very clear. Thank you very much. The next question is from Andrea Lisi of Equita. Please go ahead. Hi, thank you for the call. My first question is on your guidance for the year. You said that the first quarter 2021 was even better than your expectation at the beginning of the year. Just wondering if you are in the condition to reiterate what you said previously, to expect an EBITDA in line with consensus, or if you see something different from that viewpoint, also considering the evolution of the collections and a first quarter better than your expectations. The second question is on Italy. I see that EBITDA in Italy in the first quarter is below the first quarter 2020, where we saw two months almost normal, and one month of full lockdown, where activity was to zero. What trend are you observing here? I saw that collection was a bit higher than last year, but EBITDA is still below. Just wondering if you're experiencing some pricing pressure here, or maybe the lower EBITDA is dependent on specific actions or specific NPLs you collected with attached different level of fees? The last question is on the operating cash flow. We see a good performance in 2020, but also in previous years, the ratio operating cash flow on EBITDA was close or even above 100%. Just wondering to understand if you expect this percentage to be achieved also this year? Thank you. Okay. Andrea, we don't feel at this stage to increase our guidance because there are elements, and we don't want to use an excuse, but it's reality and impacts our business of moratoria and state measures that can impact the bottom line results in different way. We prefer to stick to our guidance until we are not fully highly confident of going for an on higher trend. Yeah, the uncertainty is still high. Just to give you an example, the productivity of the courts is increasing. In theory, the backlog is significantly reducing. This increase is still extremely low. We hope the productivity of the courts will jump in the second half of this year. Again, the uncertainty is still. All in all, I think it's prudent to confirm our current guidance. To explain you also the difference, second question. It's not just Italy. I'm talking about Greece, Spain, et cetera. To address your second question on the EBITDA of Italy, the main reason of the difference you notice is the accrual of the bonuses. In the first Q of 2020, given we were just starting from the COVID, so it was in the last month of March, and we have closed the numbers in April, we accounted, given that there was no expectation to achieve the bonus of the year, and the target of the year for very low bonuses. Now, because we are achieving, and as we said, we are better than expected in terms of results of the year, we are accruing for the bonuses in line with the expectation, and that is the driver of the difference. Net of this effect, Italy would be growing Q1 on Q1, and you can see it also from the collection standpoint, which have increased. In terms of operating cash flow for the year, today, we don't expect to go over 100%, because taking into account that the extraordinary effect of the working capital dynamic of last year, also related to the introduction of Greece with a one-off effect last year. The consistency of the upfront payment goes on from now to the end of the contract. In terms of changing working capital effect, in the second year, it's moved out. For this reason, today, we cannot confirm an operating cash flow above the EBITDA. Okay, thank you. The next question is from Nicolò Binda of Intermonte. Please go ahead. Good morning. Thank you for the presentation. I have three questions. The first one is looking Greece. It performed very well in the quarter, and if I remember well, at the current pace should overcome your pre-COVID guidance. If you could elaborate a little bit more on this point. The second one is related to the tax rate, if you could provide some guidance for 2021. Finally, I was wondering if there are some news on the windfall regarding the Spanish tax assessment in terms of timeline. If you expect to book in this year or maybe to postpone in 2022. Thank you. For Greece, on an organic basis, the company is doing very well. We expect the guidance which we gave at the time of the acquisition to be superseded by probably in terms of revenue 5%-10%. In terms of extraordinary events, obviously there are bids we are participating for new acquisition, but also our main client, Eurobank, obviously as part of the deleveraging plan, they will do disposal. As part of the disposal plan, as all our clients do, if we keep servicing the portfolio, we continue with the same contract or a new contract. While in some cases you do not benefit from a disposal fee, in our bid contract, we benefit also from a disposal fee, even if we keep the servicing. There could be these type of events which obviously add additional value to the overall results. In terms of tax rate, we are around 24%, 25%. Also in Greece, there has been a recent decision by the government to decrease the tax rate by two percentage points. That's to define if it's already occurring this year, because the consequent action has not been defined yet, or from next year. Eventually from next year, this will go down. Around the tax settlement, we had indicated in the past that we wouldn't suggest to include the cash in this year, also because we prefer to conclude the discussion. Then give any positive news. We suggest that. To include and to indicate any positive effect only next year, actually. At this stage of the discussion, we feel confident with our previous statement. Also the discussion with the tax authority has been advanced, we might have some positive news also on the final settlement amount. Obviously, when these are closed, we will communicate. Thank you. The next question is from Andreas Markou of Berenberg. Please go ahead. Hello. Thanks very much for the presentation and for taking my questions, a few of them. I will probably pose all of them together, given that we're running a bit late in terms of time. The first one is on your M&A I apologize, sir. We cannot hear you very well. Can you please pick up the handset if possible? Yes. Hi, can you hear me now? Hello? Yes. Now, Andreas, we can. Okay. Hi. Apologies for that. Yes. The first question is on your M&A strategy, the multiples you're willing to pay. First of all, what multiple did you pay for the Brazilian acquisition? What is your strategy for any new M&A you want to do in this kind of fintech and big data sector, given that we know that multiples here are much higher compared to the multiples that you have in credit management for platforms? That's the first question. The second is on your AUM kind of pipeline. You mentioned this is very strong. You're very comfortable with the EUR 7 billion-EUR 9 billion for the rest of the year. Let's take a bear case scenario where even though you are running for the Frontier portfolio in Greece, which is a significantly sized portfolio. Let's assume that doesn't go to you, but to one of the other three players who are bidding to that portfolio. Would you still be comfortable with the EUR 7-EUR 9? Are you still comfortable with EUR 7 billion-EUR 9 billion for the entire year, even if you were to miss that portfolio? That's the second question. Third question is on the margins for Spain. I noticed these are quite lower compared to previous quarters and also Q1 last year. Can you maybe explain if this is the same reason as in Italy, the accrual of bonuses? The final question is a bit more of a clarification, and this relates to your outlook for collections normalization. You said you kind of expect normalization in Italy in Q4 or in Q1 2022. If I look at the collection rate today, which is at 1.9%, and then collection rates for Q1 in 2020 and 2019, that was about 2.4%-2.5%. Can I translate your earlier statement as the collection rate will actually increase in Italy to 2.4%-2.5% by Q4 this year or Q1 next year? Thank you. Hi, Andreas. On the first point, as you can see, the amount we want to invest in this type of ventures is limited. It's obviously fully aligned, the comment you made, that these are high growth markets. In those type of markets, you rather focus on revenue multiple than on EBITDA multiple, because you are buying into a venture that has a significant growth perspective in the next couple of years. The benchmark is around 4x revenue 2021, which will significantly decline in terms of EBITDA and also implied multiple and revenue, as I said, in two years' time. On the second point, Andrea will comment. Yeah. Our EUR 7 to EUR 9 target in terms of acquisition this year do not include Frontier. If we will win this mandate, it will be on top to our current target. When I said we are confident and more than confident, positive on our current EUR 7 to EUR 9 target because I think we can exceed it will be before Frontier. Okay. Yeah. Thank you. Going to your other question on the margin for Q1 for Spain, the reason is the same as for Italy, that last year, we also had the same approach on the charge cost. If we strip out that effect, there is a growth, actually, the EBITDA margin has a positive trajectory. In terms of normalization effect, you referred to the stabilized collection rate in Q1, Q2 of last year. We confirm the levels you have mentioned of 2.3%, 2.4%. Okay. Thank you. Just to confirm again, so 2.3%, 2.4% by the end of this year, so Q4. No, Q4 and obviously Q1 next year. Q4 2021, Q1. Okay. Great. Thanks very much. Thank you. Ms. Franchi, gentlemen, there are no more questions registered at this time. Thank you very much to all, and see you at our next call in August. Thank you. Bye-bye.