Good morning. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Nexi Full Year 2023 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. 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. Paolo Bertoluzzo, Chief Executive Officer of Nexi. Please go ahead, sir.
Thank you, and good morning to everyone. Welcome to our call for full-year results for 2023. As usual, I'm here with Bernardo Mingrone, our CFO and Deputy General Manager, with Stéphanie Dalliet, who leads our investor relations activities, and a few other colleagues that may help in case we need for your questions. I will start with the key messages and commenting, as usual, volumes and our progress in merchant services. I will then hand over to Bernardo, that will take us through the financial results, and then I will close with the new-year guidance and the outlook for the medium term. Let me jump to page three that summarizes the key messages of today. Three key messages. First of all, in the quarter, the last quarter of last year, we've seen continued volume growth in all geographies.
While Italy and the Nordics have been trailing at around mid-single-digit year-on-year growth, we do continue to see strong double-digit growth in the DACH region in the quarter as well. The beginning of the year has been more or less in line with the end of last year, with growth across all geographies in January and in February so far, despite the macro weakness that we see around us. Second key message, we've seen in the year and also in the quarter continued top-line growth, very strong margin expansion, and cash generation. Revenue growth for the year has been at around 7%, with Merchant Solutions growing closer to 8% and with Germany e-commerce growing in the year double-digit.
On EBITDA, we've seen a growth of about 10% versus last year with almost 150 basis points of EBITDA margin expansion despite the inflationary pressure that we've seen on the cost base. Third, we've seen continued strong cash excess cash generation that is closing the year at around EUR 600 million, slightly above EUR 600 million, which was our target for the year. In this context, we've seen a continued debt leverage reduction. We're closing the year at about three times EBITDA, which is down from 3.3 at the end of last year. Last but not least, we had to take a non-cash technical impairment of goodwill with an intangible of about EUR 1.2 billion to reflect the share price evolution and the current market conditions. De facto, this is related to the Nets-Nexi mergers from 2021 that were done in shares with no cash component.
The third message, given this strong cash generation, and the outlook of continued growing cash generation, we have decided to propose to our AGM to have to start a EUR 500 million share buyback program. Overall, the strategy, our strategy execution is progressing well. We are seeing more and more opportunities for efficiencies and synergy delivery on the back of the group integration, and we'll take them, starting from this year at an accelerated pace. The 2024 guidance and the revised medium-term plan are confirming continued margin expansion and strong growth in cash generation in a more uncertain macro outlook, at least in the shorter term. In this context, we've decided to evolve our capital allocation strategy. We will continue to reduce leverage that remains a key priority.
We will always continue to cover the limited, actually, M&A opportunities that we see and that we expect to have in the near term. Now, but at the same time, we enter a new phase for our company in terms of capital allocation, and we'll start turning capital to our shareholders. And given where the share price is today and the management and board believes that the share price doesn't fully reflect the value of the business and its outlook, we've decided to propose to our shareholders meeting a share buyback program up to EUR 500 million over the next 18 months. Consistently with what I just said, in the year, actually over the next couple of years, we are confirming that we will pay down the EUR 1.3 billion debt maturities with existing cash. This will materially reduce our gross debt, our gross leverage, and obviously our cost of debt.
Last but not least, we continue to progress on our ESG plan, and in annex, you see a page that summarizes the progress that we've done during 2023. Overall, we have delivered guidance for last year despite a macroeconomic environment that, during the years, became much more complex and challenging than what we were expecting at the beginning of the year when we gave the guidance. Let me now move to page 4, where you see, as usual, the volume dynamics. As I did say last time, this is the last time we're providing all these details. This page was intended to help understand what was happening during the COVID period and after the COVID period. Hopefully, this is history, and therefore we'll move to a more simplified explanation of our volume dynamics.
But to comment what we have in front of us today, basically you see all geographies are growing. Italy is basically moving at around 5%-6% over the last few months. Nordics are seeing a similar trend. While actually in DACH, we continue to see a double-digit growth over the last quarter and also at the beginning of the year. When you look at the different categories, it's good to see that we have a very solid growth across all geographies on basic consumption that remains strong, and it continues to be a clear signal of the very strong cash-to-digital payments shift that continues to happen across all geographies.
While you see that the category that is suffering the most, actually is discretionary goods, as it is normal in a phase where macro is difficult and consumers need to rationalize the way they spend, and this is particularly visible in Italy and in DACH as well. Let me now move to page five that summarizes some of the progress we've done in the merchant services space. Let me just pick on a few of the points on this page. First of all, in SMEs, when we continue to see good volume and revenue growth, we have continued to expand our customer base similarly to what we've done in the previous quarters with particularly strong growth in Italy, in Germany, and in Poland.
Second, and this is very strategic for us, we continue to progress on integrated payments, on the convergence of software and payments with a good number of new ISV partnership wins in the last quarter as well, both in the ECR space and in the vertical solution space with a special focus in the sectors that we believe are the most exposed to this dynamic, being retail, hospitality, mobility, and ticketing. Moving to e-commerce, where we've seen during the year a good double-digit growth of revenues. Now, we've seen again also here continued customer base expansion with about a 7% growth with a strong continued focus on mid-market that we see as the sweet spot for us. And we continue to sign also in this space partnerships with key strategic e-com platforms.
In the last quarter, we signed a group-wide platform partnership with WooCommerce, and this is coming on top of the ones that we signed in the recent past with Magento, Shopware, and PrestaShop. Last but not least, on LKA, we continue to see solid pipeline of customer wins and the cross-selling and upselling opportunity. Here, our focus is more and more on mid-corporate and national large merchant space, where the local integrated capabilities are a key differentiator and where we are keeping, as much as possible, a strong focus on some key verticals like omnichannel retail, hospitality, and EV charging and petrol. Let me now hand over to Bernardo that will take us through the financial results.
Thanks, Paolo. We'll go through these slides. You've, you know, anticipated the group results. I'll try and leave as much time as possible for your concluding remarks and Q&A. Starting from slide seven, looking at the group as a whole, as Paolo's already said, we grew revenues in the year by 7%. This was in line with guidance we'd confirmed back in November and outstanding the market environment we spoke of. The fourth quarter was roughly similar to the whole year, albeit a little lighter. I think it's important to note how, notwithstanding, you know, the tougher market conditions, we still benefit from significant operating leverage.
As we grow revenues, EBITDA margin grew 146 basis points in the month, roughly 140 in the quarter, taking us to a 52% group-wide EBITDA margin for the year, which is in line, I would say, with the historical performance and track record. In this context, our EBITDA grew double digit 10%, slightly lower than that in the fourth quarter, but again, very much in line with the guidance we gave for the year. Moving on to Merchant Solutions, we can see how top-line growth has been a little lower than what historically we have been used to, but roughly 8% for the year, a little softer than that in the first quarter, consistent with what we said with regards to performance. However, if we only looked at international schemes, we obviously benefit from the strong growth in international schemes we've highlighted.
More importantly, I think it's fundamental to look at our growth in Germany and e-commerce, which are two of the key pillars of growth for our strategy going forward, which are growing double-digit. Indeed, e-commerce is probably growing twice the speed of the market. Moving on to Issuing Solutions on slide 9, again, we have guidance which is, I would say sorry, results which are at the top end of the guidance we have always provided for this business unit, which is to grow mid- to high-single-digit. So growth for the year is 7.6%. As we knew, as we had planned for the beginning of the year, a stronger fourth quarter than the rest of the year.
This is due to a number of things we've highlighted on the top hand, top right hand, corner of the page where, as you know, a lot of work gets done for banks. These are primary partners in Issuing Solutions. The phasing of the project work we did for banks was skewed towards the end of the year. As I said, it was planned, but you should think of it also as something which, you know, is hard to predict upfront for next year. Indeed, I think one word of warning: the reason why we call this out is that given the more prudent environment we want to manage for next year, I think we've been a little more conservative in 2024 than 2023 with regards to this kind of project work.
The fundamentally important point I would like to highlight on Issuing Solutions are basically the first and the last in the page. The first one is that we've gone past the 6 million international debit cards in Italy. As you know, we've discussed this a number of times. This product for us is significantly more valuable than than domestic traditional simpler domestic scheme cards. There was a strong push in the year which also contributed to this result. The final point which is also crucially important to our success in our strategy, we continue to upsell and cross-sell value-added services in different geographies from Italy, also in Italy clearly, but also outside of Italy. And this is important when we'll come to see progress in the DACH region in the fourth quarter as well, in a couple of slides. DBS I think had a very strong year.
It is the business unit which least relies on growth and volumes. However, the exposure to instant payment growth in the European market where we are a very significant player thanks to our partnership with the EBA Clearing has helped basically offset the loss of customers in prior years. So we'd lost bank customers in Italy through banking mergers, and the loss of those revenues has been more than offset by the, the growth in, in the business. So strong year for digital banking solutions which grows about 2% at top line in line, again, with, with our guidance for this kind of business. Slide 11 gives you the geographic breakdown of our, of our the growth in our businesses. Italy growing 7.5%. Nordics slightly lower than that in the mid-single digit range.
DACH in Poland and is a key driver to top-line growth with growth in the year of 8%. The fourth quarter, I think, is more driven by some project work, again, as I was mentioning, on issuing and some customers. We won in Germany in particular. But in general, strong year for DACH in Poland region, Southeastern Europe, and others, benefits from the acquisition we closed, when was it? In February this year of the Intesa book in Croatia, which also contributed materially to growth in the period. Slide 12 is an important slide for us to spend a moment or two on. It's cost performance. We had guided to costs being lower than 4% in the year, at least to discuss. That was our outlook during the course of 2023. Indeed, we closed the year at 3.8%.
This is notwithstanding significant inflationary pressures which all of us are keenly aware of. And this is very much so, so much so we're very much in renegotiating labor contracts throughout Europe and Italy in particular where, you know, we have half of our business or just under half of our business is in Italy, including the workforce. As some of you might know, given I would say the strength in the banking market thanks to the high-rate environment we had we have the national credit contract applying to our colleagues in Italy.
There's a very, very, front-end skewed negotiation in terms of updating that contract which impacted us at the back end of 2023, so much so that if we normalize for that big one-off we had to book in, in December, growth in HR costs in the fourth quarter would have would actually have been zero. In any event, I think through, synergies which we continue to benefit for, efficiency programs which we continue to implement, we managed to contain cost growth on the non-HR expenses 2% and overall, to under 4% for, for the group, as I said, showing our continued commitment, with regards to cost control. Moving on to CapEx, the trend has inverted. We are down year-on-year by approximately EUR 25 million, a 5% reduction.
This is also thanks to the fact that we're completing, finalizing the what we had earmarked as transformation costs following the mergers with Nets and SIA, which were announced at the end of 2020 but implemented ultimately from 2022 onwards, at least with regards to the merger with SIA. And we expect, and Paolo will talk to guidance, we expect this trend to be consistent with what we had discussed in the past with regards to CapEx. It's important to highlight how, and we give you an indicator here of progress in simplifying our platforms, reducing them by number, and also data centers, even though we measure a number of data centers and it should be in square meters. This is just a coarse measure of how we are gaining those efficiencies, synergies, and lower CapEx.
Slide 14, as usual, highlights how, you know, the costs which are booked below EBITDA because they are non-recurring in nature, because they're not related to the ordinary business, if you want. Transformation integration costs, these are cash costs, are down 24% year-on-year. The trajectory will continue as planned. On the right of that, you can see some other costs including, clearly, the impairment charge Paolo spoke of, which is non-cash. We never paid for, we never paid cash for the mergers with Net and SIA. So all of this is an impairment of an intangible which was not generated by a cash acquisition. I mean, it's a, I'd say it's obviously unfortunate that we had to, you know, had to devalue the goodwill, but at least it wasn't paid for in cash.
We have the usual other buckets which include non-cash costs like LTI or even those 5 years down the line, there's still some IPO-related costs, borne by the initial financial sponsors. In M&A, impact fees, and others, we have the impact of earn-outs, M&A carried out in the past, and so on and so forth. Slide 15 is the walk to EUR 600 million of cash generation a year as per guidance. This is a 27% increase year-on-year, taking into account, as you knew, that we had benefited from a higher cash balance coming into 2023 due to the deferral of cash component of a tax from 2022. Taking that into account, cash generation bottom-line cash generation was EUR 500 million in year, EUR 600, less than EUR 100 from the year before, compared to EUR 400 million the year before.
It's a EUR 100 million increase, so in line with our expectation and our guidance. Slide 16 is about the leverage. We've come down from 3.3x to 3x. That trajectory will inertially continue. This is very highly generating cash business. The debt, you know, the debt stack was generated from the, you know, the, the sponsors acquisitions of Nets and Nexi. Very little of this is related to M&A activity. In general, it's coming down. From April, we'll start reducing gross debt. We'll pay back an asset notes in April as they come due and as we've committed to, and so on and so forth in October with the publicly traded bonds, etc.
I think it's important to highlight how rating agencies have taken a favorable view with regards to the progress on the leverage and cash generation with six upgrades over the last couple of years, which is clearly very pleasing from our standpoint. I always like to highlight how the cost of our debt stack is limited, less than 3%. At current rates, it's as if we had half of the debt we have on our balance sheet given the cost of this debt. We will continue to benefit from this for quite a while longer. Slide 17 summarizes what Paolo has said, i.e., that we have reached a turning point in the company's transformation and journey. Now we are capable and able to start returning capital to shareholders.
We believe, you know, there's sufficient significant cash balances we already have, plus the cash generation going forward, the high visibility we have on the business, on M&A, on the debt maturities that allows us to plan for this. We believe that the stock price gives us the best, the most compelling opportunity to do so. So, at the next EGM, we'll propose this up to EUR 500 million buyback program which will commence shortly thereafter and last up to 18 months. I think it's important to know the last bullet point we put on this slide, which is, you know, we believe this is, you know, the start of a capital restitution phase in Nexi's corporate life.
We believe that after this initial 18-month period in 2026, we'll be at a point in time when we can consider other forms of capital restitution, maybe still buybacks, maybe dividends. But this is not to be considered a one-off. With that, I'll hand the floor back to Paolo for his closing remarks.
Thank you, Bernardo. Let me jump to page 19, to cover guidance and updated medium-term outlook. Let me start with the guidance for the new year. In terms of net revenues, we expect to see a mid-single digit, year-on-year growth, in a macro environment that we expect to remain uncertain, fragile throughout the year. I just want to underline that as far as merchant service is concerned, we expect to see, in fact, a gradual acceleration towards a high single digit.
As far as EBITDA is concerned, we expect to see a continued EBITDA margin expansion of 100 basis points plus, which basically means a mid to high single digit growth for EBITDA. As far as excess cash is generated, we expect to generate more than EUR 700 million. Actually, we hope to do materially more than that. These EUR 700 million are already net of cash severance costs for about EUR 70 million-EUR 80 million that we will have in the year that will support further efficiencies and synergies going forward. And if you embed this into, into the EUR 700, this means that we have more or less a gross cash generation, pre severance cost of about EUR 800 million. Therefore, continuing under our strong growth of excess cash generation.
Last but not least, as far as net leverage is concerned, on an organic basis, therefore pre-M&A and pre-returning cash to shareholders, our organic leverage would be down to 2.6x EBITDA. We already embed the announced M&A, Sabadell in particular, but also what we expect to have as effect of the share buyback program. And we expect, also including these elements, to be below 2.9x EBITDA and therefore continuing our leverage even if we return cash to shareholders. As far as the medium-term outlook is concerned, assuming that we will continue to see, which is our conviction, a robust cash-to-digital payments conversion and we will have a macro environment gradually recovering in the medium term, we expect to have a gradual acceleration of the top line from the mid-single digit that we expect in 2024 towards a high single digit space in the longer term.
I want to underline we see the full potential of the business, the underlying full potential of the business to be running at high single digit in the longer run, hopefully after, you know, macro tensions are over, inflation is over, wars are over, and so on and so forth. In any case, we expect to continue to expand EBITDA margin above 100 basis points per year, and we expect to continue to increase our cash generation strongly, reaching about EUR 1 billion in 2026. Again, if you look at what it means in terms of leverage on an organic basis and therefore pre-M&A and pre-returning cash to shareholders, this would mean about 1.5x EBITDA in terms of net leverage.
However, we believe that we want to operate with a target leverage of anywhere in between 2-2.5x EBITDA, and we will reach that level by 2026 after the M&A that we speak to have and after the buyback that we are announcing and potentially further capital allocation to shareholders in the future. Let me now close on page 20 summarizing the key messages of today for us. Number one, we continue to see growth across all geographies across the last quarter but also beginning of this year. We are closing 2023 with very solid revenue growth, with strong continued margin expansion and cash generation growth. Last but not least, you know, we see continued cash generation growth for the business on the back also of the updated outlook.
This enables us to basically, develop further, evolve further our capital allocation policy, start returning cash to our shareholders, and we are starting now with a EUR 500 million share buyback program while continuing to the leverage. Overall, we have delivered the guidance for last year despite a macro environment that has been more challenging than expected. As a consequence of all of this, you know, we expect for the new year a mid-single digit top line growth, a continuing expansion of EBITDA margin allowing us to deliver mid- to high-single-digit EBITDA growth and excess cash for more than EUR 700 million. As I commented a moment ago, you should read this as an underlying more or less EUR 100 million, EUR 800 million pre the impact of severance, cash severance in the year. Let me pause there. Let me stop there, actually, and let me open to your questions.
Excuse me. This is the CORES 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 is from James Goodman of Barclays.
Good morning. Thank you. A couple from me, please. Firstly, just on the integration and transformation costs. Could you tell us just what you're expecting there for 2024 but more importantly, what the overall remaining bucket of those costs is? And just the EUR 70 million severance costs that you just mentioned, Paolo, I mean, are they being excluded from EBITDA this year, or are they also within the EBITDA and the cash flow? And then the second question is just around EPS. I think you originally guided to 10% growth in normalized EPS for this year, and delivered five. Just could you take us through what below EBITDA was a little bit higher than anticipated and why you've moved away from including an EPS guidance in the medium-term outlook? Thank you.
Hi, James. Thank you for your questions. Let me do it to Bernardo to comment on both.
Yeah. So the first one that I caught, James, was on the provisioning for the, you know, so for the staff reduction, for the redundancies, etc. This is below EBITDA in those integration. We book that below EBITDA. The cash component will be mostly spent during the course of 2024, even though there will be a tail, and the tail relates to the way we exit people in Italy, which is on a voluntary basis and based on early retirement schemes, which mean that people need to qualify for them over time. As I said, the vast majority, more than half, is this year, and that's about the EUR 70 million-EUR 80 million Paolo's referring to. And then there will be a tail of the cash out in future years.
From a P&L perspective, we'll book, book the vast majority this year, 100% of it, I would say, this year. That's below EBITDA. The benefit, obviously, of people leaving will be within EBITDA. I hope that's clear.
Yeah. That's helpful. Thank you. And just, just the other part of it was just on the integration and transformation costs overall there.
Yeah. Yeah. So, if I know it's a big ask, but if we ignore what goes on with the things outside of the callout on the left of the slide where we talk about integration costs, so if we ignore M&A impacts, which, as I said, comprise both, you know, fees, expenses related to M&A acquisition, but mostly in this case, you know, the booking of earn-outs, or in the past as well, related to past acquisitions, and so on and so forth, LTI, which is non-cash and it's primarily market-driven in terms of value, the IPO costs which are just flowing through Nexi, paid by someone else, and are always smaller. So, and then obviously, the big devaluation this year, which we trust won't happen again, going forward.
Just focus on that EUR 116 million for the year. We think that trajectory, as we had discussed at the Capital Markets Day in 2022, is continuing to unfold and will take us to roughly EUR 50 million, which was our target back on the Capital Markets Day, probably, you know, with a year or so delay compared to then. I would say that the trajectory is firmly underway. It's very fortunately very hard to predict with 100% certainty the evolution of these. Which takes me to the EPS question. What happened with EPS? Essentially, well, two major contributors to the miss on the bottom line.
The first one is clearly we had. I'd say we were probably a bit more aggressive on the guidance we gave on EPS compared to the top line in terms of giving a more precise number. Or more, there's a bit more prudence in guiding to EBITDA. Given that we landed the year at the minimum, let's say, at the floor of what we had guided to, you know, we were probably a little more optimistic with regards to our ability to do better below EBITDA, which didn't work out. That was one of the primary drivers. The other one was, again, going back to predictability. On D&A, we had slightly higher D&A than what we expected.
This is not the D&A on customer contracts, which we exclude because that's just the amortization of the goodwill related to the prior acquisitions of books, but on the IT spend, effectively. And the, you know, the timing of when we start depreciating these assets is driven by when, you know, project work which is completed actually goes into production, starts working. And that, again, there is a margin of error in that prediction. And therefore, we had slightly higher, slightly higher, D&A, which is ultimately good news because we're quicker, let's say, than what we originally expected, but that impacted the EPS number. I hope that was clear.
That's very helpful. Thank you.
The next question is from Josh Levin of Autonomous Research.
Hi. Good morning. Two questions. With regard to strength in the DACH region, do you think you're taking share from competitors, and if so, which competitors? Second question, have you considered changing Nexi's financial reporting so that the balance sheet and cash flow statement look more like those of other payment companies? It would make it much easier for investors to analyze the company, especially the cash flows. Thank you.
Good morning, Josh. I'll let Bernardo handle the second one. As far as the DACH region is concerned, it's very difficult to have a 100% clear assessment of what is happening. Our, however, our estimates are suggesting that, yes, we are taking some share there, which I think is has always been our ambition given the fact that in those markets, we are actually challengers starting from a relatively smaller position. Difficult for us to say who we are taking a share from, but I would expect from the larger players, which is a normal dynamic in this type of situations, I think. As far as the reporting is concerned, Bernardo?
Yeah. I hate to say this because we'd love to be able to change our reporting as a corporate, and we've looked long and hard into this. But basically, the tax cost for us would be too. The reason why there's a tax cost, which is counterintuitive, is that as Nexi, the way Nexi reports or is classified from a tax perspective, it's a financial holding company that benefits from a certain tax regime, which allows us to tax-deduct interest payment on our debt, which is still very high, as you know. We would lose that benefit if we reported as a corporate natively, which is a cost which we'd rather not bear for the time being.
At some point when we've reduced the interest expense, there'll be no opportunity cost, and we, well, we may well do that. But please note that when we publish our accounts, we've done everything we can to provide the reconciliation from a natively, you know, a balance sheet which is natively more similar to that of a bank than a corporate, and the cash flow which is the one a bank produces rather than a corporate, to what we publish. You know, this reconciliation is audited by our auditors. It's automated. It's not something which we, you know, we produce manually. I understand it's not, you know, it's not easy for you to, you know, to reconstruct the cash flow without this, but that's the best we can do.
Thank you.
The next question is from Justin Forsythe of UBS.
Hey, Paolo, Bernardo, team. Thank you so much for having me. Couple questions here. First, a more strategic one. Wanted to ask a little bit about the longer-term grand aspiration for Nexi and getting to that longer-term acceleration to high single digit top line growth. Is there anyone you're emulating from a strategic perspective, perhaps Fiserv or others in the industry? And further on that point, given the acquisition of Orderbird, should we expect you to start pushing Orderbird through bank distribution channels in Italy to better serve SMEs? Second question, probably more for Bernardo. You talked to a 100 basis point EBITDA margin expansion going forward, medium term. Seems like you're implying low to mid single digit cost growth. Maybe you could link in the benefit that you expect to see from efficiency gains and decommissioning platforms and how directly that could benefit margins.
Further, I believe you're still processing on a third-party basis with Equens. When do we expect that contract to roll off? Thanks.
Good morning, Justin. Thank you for your questions. I will let Bernardo take the second. On the first one, listen, I think that the ambition that we have to gradually bring back growth to a high single digit is intact, as far as we assume basically two things. Number one is that the macro environment becomes more supportive than what has been last year and what we see this year. And let's see what next year looks like, as we go through it. And clearly, this has to do ultimately with consumer spending coming back to be robust and healthy across most of the categories, across most of the geographies, hopefully without macro tensions coming from geopolitical situations that we are all aware of. Plus, obviously, having our initiatives kicking in materially, you know, and allowing us to accelerate growth.
Just to give you a sense of it, we have a clear, you know, growth engines that are supporting our performance, quite materially that are, for example, the DACH region, Poland, e-commerce, and a few others. Hopefully, we'll be adding Spain soon. And these growth engines, while they're growing very nicely year on year in terms of percentage growth, they're still a bit small, you know, compared to the rest of the business. And as time goes by, you know, these contributions will become more material also in absolute terms. Do we have, you know, benchmarks or references for our strategy and so on and so forth? You know, it's very difficult to say because every geography is very different. Every geography has its own dynamic. And, by the way, there are not that many other players similar to us out there.
Clearly, you know, we see a lot of similarity with what some of the American players are doing, especially when it comes to the focus on merchant services, SME, software convergence, and so on and so forth. Even if, as we discussed in the past, we see these dynamics coming to Europe at a much lower pace and a much more fragmented pace. The European market remains very, very different from the U.S. one. While this fragmentation has a big impact in making a local presence in every single geography and local scale very relevant for payments, it is more so as far as software is concerned. If you look around Europe, you don't see a lot of software players being successful across many geographies at scale.
So yes, that's probably, you know, the pool of companies that look more similar to us in terms of strategic direction. But again, we really need to adapt to the local market environment. And I think that your question around Orderbird is really well put in this context. As we discussed in the past, when it comes to software payment convergence, our core strategy is to basically partner and bundle with specialized players on top of, and that's the reason why we're always underlining so much the evolution of our partnership strategy, the evolution of our partners' portfolio, the evolution of the tools, the digital tools and the enablers that we make available to them and that we believe can be real differentiators in this space. There are, if you wish, two twists to this.
The first one, as do with Orderbird. Orderbird, we own. As you know, Orderbird is one of the top three players in Germany and a bit in DACH as well when it comes, in particular, to the hospitality space in the software space. And for us, this is an amazing, amazing learning experience and laboratory, if I can use this word. We are already progressing in bundling the products and services and cross-selling and upselling through Orderbird sales force and through Nexi Germany sales force, that bundle. Will we export Orderbird exactly across geographies is something that we'll be considering. But again, as I said before, exporting cross-border software, SME software, is not easy. It's probably easier to export across sectors in the same geography because you have to comply with a long list of local tax or administrative rules that make cross-border expansion a bit more complicated.
The second caveat to the strategy is something that we have started to do more and more last year, and we'll be accelerating across all geographies this year, which is bundling in our core proposition across segments, you know, in every single market, a basic ECR proposition with our smart terminals and payment proposition to be able to provide an end-to-end solution for smaller merchants with more basic needs. We see this becoming relevant in the market, and we see this as a pretty material upsell and customer value growth opportunity. As far as the OpEx, yeah.
No, I think we were part of strategy. I think it's important to know that we speak with you guys, with investors, because we try and learn from others, learn what works, understand what doesn't work, what might work. So we always cherish also discussions with you, Justin, and the rest of the people listening. And, on the margin expansion, so I think it's important to highlight again, I don't want to dwell on performance for 2023, but as you can see on slide 12, I mean, admin or non-HR costs were growing 2%. This is in an inflation environment where, you know, we're facing very, you know, high single digit, year-on-year growth of our supplier costs. It's a year in which volumes grew, and not 100% of our cost base is fixed.
Now, notwithstanding this, we managed to contain that growth to 2%. A different story needs to be told about HR costs. HR—sorry, IT costs within that were actually down year-on-year, going also to the question you had on platforms. And this is the benefit, as I said, of managing our scale as effectively as possible, consolidating suppliers, benefiting from synergies, which means closing down things we do twice or three times, rather than just once. And we highlighted the closure of platforms and data centers. And all of this, we will continue to benefit from in the coming years for, you know, a lot longer than what we had originally guided to in terms of synergies because, you know, focus is always on the first few years.
But the truth is, there will be plenty of cost outcoming well after 2025, 2026, and 2027. This will help us manage cost growth in the future to a level which is clearly significantly below revenue growth and therefore helps us create the margin as in the past. Historically, we've always grown between 100 and 200 basis points. When we were buying books, we might have had an uplift in terms of the EBITDA margin thanks to the nature of those acquisitions in Italy. But historically, we have delivered this kind of performance. In the future, we expect to continue to do so, including insourcing from external providers.
Now, in particular, Equens is now relegated to a very small amount of external processing, as is, I think, Fiserv in Germany, where we're almost complete in terms of the internalization of that, as is, you know, in the coming years. It's going to be the same in Greece, where we are relying on an external First Data platform, which we're insourcing. All of this is well underway. In general, third-party processing costs now are a very small fraction of what they used to be, for Nexi and, and Nets and SIA in the past. And that has contributed. Reduction in IT costs, that 4% reduction we had in 2020-2023.
With specific reference to Equens, you know, we may well not insource 100% of what we do with them in the very short term, in particular on the issuing. We've done that on the acquiring front, which was critically important to our competitiveness, but not so on some of the issuing products in Italy in particular, where we'll continue to have a relationship with them for a few years yet to come as we insource, let's say, the higher contribution businesses to us in the short term and focus on those first.
Well, thank you so much. Very comprehensive. Appreciate it.
The next question is from Sébastien Sztabowicz of Kepler Cheuvreux.
Yeah. Hello everyone. Thanks for taking my question. Just as a clarification, how do you see your three divisions trending in 2024? What kind of net revenue growth should we expect in these three divisions? And a clarification as well on the cost savings. You mentioned EUR 70 million-EUR 80 million of cost impact in your, I would say, P&L and cash flow 2024. What kind of cost savings are you implementing right now? Thank you.
Good morning, Sébastien. Thank you for your questions. As you know, we don't guide by BU. But to give you just a sense of it, as I said before, we expect merchant services trailing towards high single digit, while we expect issuing to have a lower growth compared to this year, as you understood from Bernardo, this year was affected, as expected, by a number of elements that, given the macro environment, we do not necessarily expect to see repeated, for example, bank projects into the new year. And therefore, we are taking materially more conservative stance here. And DBS, the third business unit, we expect it to continue to trail basically at low single digit or thereabouts. As far as the cost saving is concerned, let me first of all just make one point.
EUR 70 million-EUR 80 million severance effect that I've mentioned as a cash effect in the year, as Bernardo said, it will be followed by another, more or less similar amount, spread across the following two or three years, given the way these type of things work in Italy, where most of the exit will be through pre-retirements that are cash at the moment when the person basically retires. The P&L impact will be, therefore, the full amount of these flows. And therefore, it's going to be around EUR 150 million that will happen this year. To cut a long story short, the basically the run rate impact of these investments that we are making should be anywhere around EUR 90 million.
And therefore, you understand the payback is very, very, very strong. And a good part of this will be seen this year because most of the actions have already started. You may have seen, for example, that we have announced already an agreement with the Italian unions a few days ago in this context.
Okay. Thanks. Yeah. And one last question on the CapEx. What should we model in terms of CapEx and, specifically, the transformation CapEx for 2024?
As far as CapEx is concerned, we expect to continue to basically complete what we have defined transformation CapEx this year. It should be around the last EUR 30-EUR 40 million. And we continue to expect to reduce CapEx further this year, both in absolute terms and as a percentage of revenues. And we expect to continue thereafter to see CapEx going down both in absolute terms and percentage terms.
Thanks a lot for all of this stuff.
The next question is from Gianmarco Bonacina of Equita.
Yes. Good morning. A few questions on my side. The first one is, considering the technicalities of the impact of the new labor contract, if you want to flag anything about the phasing of your EBITDA growth in 2024, if we should bear in mind maybe, some, some impact of lower growth, first half versus second half, given this started at the end of 2023. The second one is about your debt bridge. If you can flag more items below EBITDA impacting the debt in 2024, in particular, what's the total M&A outlay considering Sabadell and maybe earn-outs and other, let's say, non-recurring items and working capital. And the last one is on M&A. If you can confirm that you are doing a strategic review of the digital banking asset.
And then in terms of, let's say, negotiation with banks, I try to calculate what's implied in your, let's say, leverage ratio. I calculated that you can spend about EUR 500 million in M&A in the next couple of years, if you can confirm that. Thank you.
So then, Marco, thank you for your question. Let me try to cover two or three of them, and then I will hand over to Bernardo for the rest. As far as phasing is concerned, you're making obviously a good point. Yes, we expect the impact of these, of the broader efficiency programs and not just the Italian severance effect, being more impactful towards the end of the year, even if some of the effects will have also at the beginning of the year, given the fact that we try to anticipate as much as possible, as you've understood, the key initiatives. At the same time, you should combine this with top-line growth.
So, what you just said is absolutely valid as far as OpEx growth is confirmed, you know, and as far as top-line growth, we will probably have a more difficult comparison towards the end of the year, especially in Issuing Solutions, for what Bernardo has mentioned before in terms of the expected one-offs and phasing effects that we've seen in the fourth quarter there. And therefore, EBITDA dynamic will be affected by the combination of these two elements. But on cost, it is exactly the way you said it. As far as DBS is concerned, the third business unit is concerned, we can just confirm what we said in the past and starting from the Capital Market Day.
It's a business that, in general, we like, even if there are areas, is a portfolio of businesses, in fact, that are within that portfolio, businesses that are for us less strategic and that may have better owners. And therefore, now, we will capture those opportunities as they arise, as we have done for eID in the Nordics, the deal that we have announced a couple of months, a few months back. And we expect to close more or less in the summer. And we'll keep you updated on how it evolves there. In terms of M&A outlook, let me avoid to comment on the number as soon as I thought. Obviously, we had to make our own, our own estimates. And by the way, it's not just in terms of what we may buy but also in terms of what we may sell.
And therefore, in our plans, in order to define the buyback and our leverage outlook and so on and so forth, we try to embed our best assessment of both. Reality is that when we look at the market out there, we don't see. I mean, I can only confirm what I said in the past. We don't see any major, large M&A opportunity that we are desperate for going after, to be honest with you. We see maybe a number of smaller things, mainly bank books that we may decide or not to pursue, depending on value creation for our shareholders compared to alternative use of cash that we have. So we really want to focus on the organic growth of the business, and the implementation of our own initiatives. Bernardo, there was a below EBITDA?
No, I think it was in general on the debt, rather. So just to also try and then recapture what Paolo was saying. So please bear in mind the EUR 700, at least EUR 700 million of cash generation is obviously after, you know, after, for instance, the restructuring costs that we mentioned earlier. So it's free cash. It does not include M&A. It does not include debt repayments. It does not include earn-outs and the likes. So going back to what to expect, I think, in the next couple of years from this cash flow generation, the use of this cash flow generation. As Paolo was saying, limited M&A. You estimate EUR 500 million.
I would argue that, you know, given what's out there, it's unlikely, given where we are in March, the discussions which are or aren't happening. It's unlikely that there would be. I would venture as far as saying it's unlikely we'd have a net EUR 500 million out, including the fact that, as Paolo was saying, we might be sellers of some businesses going forward as well, even though they might not bring cash in in the short term given the overall environment. But that is probably an ambitious amount to be able to think about and cash out. But we have signed a number, or about to close in the next couple of weeks, hopefully, a couple of deals which were announced in the past. Think of Sabadell in Spain. That's EUR 280 million cash out.
That would come out of the EUR 700 million or the existing cash balances. The EUR 500 million of buyback will come out clearly of existing cash balances and the cash generation. Earn-outs don't hit us this year. They hit us next year. We might have an additional small—we're talking tens of millions of euros—of investment in things like Computop that we have invested in in the past and may wish to shore up. But that's really about it.
Thank you.
You're welcome.
The next question is from Hannes Leitner of Jefferies.
Yes. Thank you for letting me on. I think a lot of questions have been answered. But maybe you can drill down on the project revenues. You mentioned that you have been here more conservative. Maybe you can remind us about the impact of project revenues in 2023 and then what it means, how much you expect in 2024. And then just on CapEx, you mentioned you have decommissioned various platforms. Maybe you can remind us here how many platforms you still have to decommission and then how many platforms you plan to have at the global stage. Thank you.
Thanks, Hannes. With regards to project revenue, let me describe the nature of these project revenues first. I'm not going to give you the detail of what we put into our plan next year. But the nature of these I would divide it into two, kind of, categories. One is kind of M&A-like driven project revenues. So I'll give you an example. A few years ago, a bank called, well, I don't think I can make names. But a small regional bank was bought by another big client of Nexi. And they've migrated their card portfolio from the former's former bank's bill setup to the new bank setup, always a customer. You know, we gain and lose on these things. We gain on the project work, because it requires migrations. It requires bespoking of the products to the new target platforms, etc.
We earn money on that. That is what is the positive contribution I was referring to, in this respect. Ultimately, you know, we tend to offset this positive gain, unfortunately, because when M&A happens, it creates bigger customers that are on a, you know, per-card basis or per-transaction basis, pays less. But the volumes go anyway. So that's one kind of project revenue, which is very hard to predict given the difficulty in predicting banking M&A. I think for 2024, given what we know in the market, there's unlikely to be this kind of revenue because there's not a huge amount of banking M&A which happened during the course of 2023 whereas there was in 2022 and the years before.
The second part is more related to, let's say, ordinary business project work which has to do the way the way we manage and price products and services for the bank. So I don't know, the loyalty program, you know, the distribution, fees we pay to the banks, and so on and so forth, which is more, I guess, predictable and manageable, because they are kind of customer value management initiatives, as we call them. On both, on both of these fronts, we've been slightly more conservative, in, in terms of our ambitions for 2024 compared to 2023. And this hits us almost out 100% on issuing, I would say, which is why you had the very strong performance in the fourth quarter and of the year and, in general, a very strong year.
With regards to the platform, so we had the, the Capital Markets Day, we'd given you some KPIs or, or some indicators which were 45 data centers and 25 platforms, 25-plus. Now, with regards to data centers, it's a lot more it's a lot easier to be precise, right? There are sites. There's square meters that need to be rationalized, closed down. We have given you the number of data centers which we have closed down since then, which is 13. And we will go to the target level of 15, if I remember correctly. It will take time. I think the two biggest closures are expected in July this year, which are the former SIA data centers, Charlie and Mike, which are the biggest in terms of square meters, etc., and hence of savings going forward.
With regards to platforms, we were referring to the core processing platforms. There's 25 more or less of them. But we have more than 25 platforms, particularly if you include DBS and if you start including the fragmentation and e-commerce, etc., which were not really, let's say, the ones that we were highlighting, which doesn't mean we're not closing them down or nor focusing on them. It's just that we wanted to make sure that you had clear that at the at the target stage, when we get there, we will have 2 core processing platforms for issuing and two core processing platforms for acquiring. We're en route to that.
There will be the former NETS Uni platform for the authorization and the former NETS Way4 platform for card management and the former Nexi platform for core acquiring and a new former SIA platform, called PowerCARD, in Central and Southeastern Europe.
Yeah. Actually, on data centers, the more we look into it, the more we find opportunities to rationalize even further and more than the target we gave ourselves, when we spoke at Capital Market Day. Thank you, Hannes.
Thank you.
The next question is from Deepshikha Agarwal of Goldman Sachs.
Hi. Good morning, everyone. Thanks for taking my questions. I had two, actually. So one was basically this medium-term target in terms of re-accelerating to high single digit. We understand, like, macro would mostly be re-reflected in merchant services. So how should we think about the issuing business over the medium term? That is one thing that was our question. And the second one is basically we have excess cash expected to go to around EUR 1 billion, and which is roughly around somewhere around EUR 200 million being added to the excess cash. So what are the various moving parts in terms of, you know, thinking about like, where, basically, is this growth coming from broadly if we think about over and above the EBITDA growth?
Good morning, Deepshikha. So, on medium-term targets, the business that we see accelerating the most is, in fact, merchant services. That is the one that should benefit the most from macro recovery but also where we see most of the growth opportunities. As Bernardo has mentioned, as I also mentioned before, we see issuing a bit more affected by specific, you know, bank-driven dynamics. And therefore, we remain more conservative on growth there. We continue to believe that, longer term, this is a business that can grow mid-single digit, mid-twice-single digit, but in a healthier environment. But it will take, we think, some time for that. As far as excess cash is concerned, the dynamic is fairly simple. We continue to expand to grow revenues and expand EBITDA margin. And therefore, you have the EBITDA growth component contributing to it, number one.
And that's normally the biggest driver. Number two, you have CapEx—sorry, you have non-recurring costs going down. As you have understood from Bernardo, in 2024, it will go down but less than what we were expecting because of the severance costs. But then, after that, it will re-accelerate, downwards, on a cash basis. I'm talking about cash basis here. Third, CapEx, as I said before, we will continue to drag them down. So both non-recurring and CapEx are a contributor to excess cash generation. And then, sorry, the third element, interest, as we pay down gross debt, you should see also a reduction of interest. Unfortunately, the one thing that will go up, but it's a fact of life, but it is actually positive, are taxes, as we grow our net profit, you know, will go up.
This is the dynamic that should bring us to this, about EUR 1 billion around 2026.
Okay. Thank you so much.
Thank you.
The next question is from Aditya Buddhavarapu of Bank of America.
Yeah. We can hear you now. Aditya?
Okay. Great. Sorry about the delay. So just a couple from my side. Just going back to the potential for further disposal, you did mention that within DBS, there might be health and assets which, you know, might have better on the screen. Maybe a bit more detail on because there are a number of assets within that. What do you think actually could be maybe a bit more non-core for you, and, you know, what could be more attractive to keep, because I guess there's been a few press reports around this, of course, in the recent months? And then secondly, could you also just give us an update on the renegotiation of the UniCredit? I think that is something which, you know, is probably still ongoing. So maybe any, any update on that.
And then maybe if you could also just talk about some of the acquisitions you've made over the last year or so, the performance of those, and how they're contributing to growth as well. Thank you.
Thank you, Aditya. So on disposals, let me not be specific here because this is something that we are testing the market with. But if you go back to what we discussed in the past, there are a few activities into DBS that are quite strategic. Just to mention one, we are partners with EBA Clearing on basically clearing services, instant payments in particular. And this is something that, especially after you know the new ECB rules being implemented and so on and so forth, we see having a great potential and clear strategic synergies with what we are doing, and other areas that clearly are strategic as we look forward to the implementation of the digital euro where we are being very active across the board. Others, honestly, are much less so.
There are players that are much more focused than what we can be on those businesses. But again, let, let us come back to that, as we explore the market. We can give you a better and more realistic outlook. As far as UniCredit is concerned, I can only reiterate what we said in the past. We have a long-term relationship with UniCredit with a contract to 2036. We are having very constructive, very constructive conversations with UniCredit. And now we can support them to evolve their strategy. But actually, we let UniCredit talk about their strategy when they will believe it's appropriate. As far as acquisitions are concerned, we normally see good level of performance across, across all of them, that, by the way, may create some earn-out cash cost, going forward.
I would say across all of them, in general, we see good volumes, normally a bit ahead of what we were expecting across all of them, I would say. We see good repricing opportunities in many of them, sometimes ahead of what we thought. Depending on the specific market, sometimes we see some margin pressures that are not really price pressures, but we see some margin pressures because the mix of volumes is different from what we were expecting. For example, a case of this is Greece where the touristic dynamics have changed quite a bit after COVID. And this we recover in the medium term as we reprice the business to reflect the new nature of the volumes that we are managing. But in general, they are trending fairly, fairly well.
Great. Thank you. Maybe if I could just ask one follow-up on the cash return. I think you've said, you know, there's probably scope for further capital returns, in terms of that 2026 excess cash generation number. Could you also comment, you know, if you do have more disposals, you know, would, would that probably be redirected more towards cap, you know, cash returns, you know, given, you know, your, your views on the, you know, world share prices? I guess compared to, like, a more than a yeah.
Yeah. Aditya, we will take a very pragmatic approach exactly as we have done in the case of the buyback, the EUR 1 billion buyback that we are announcing today that we'll propose to our shareholders meeting in April. And the approach is very, very simple, you know. Basically, you know, we look at the outlook of the business and its ability to generate cash organically. We will look at the M&A opportunities and both for acquisitions and disposals that we will have when we will get there. When we will get there, it's very difficult to foresee what will happen in 2025 and 2026, especially in 2026. And we'll see where we are in our journey of the leveraging and where the markets are in terms of interest rates, cost of debt, and in general, expectations around it.
Then we will decide what is the most appropriate way to return capital to shareholders. Clearly, if we have material excess cash from the net M&A activity, that would be a positive to do more. But it's really too early to say. I think the key message that we are trying to deliver today is that on the back of, you know, the performance of the year, the growth of cash in the year, the outlook, even in a more difficult macro environment, that we are really entering into a new phase for the company where we will be able not only to continue to leverage and serve the M&A that we expect to have, going forward but also to start returning cash to our shareholders.
In this exact phase, given where share price is, we believe that the most effective, value-creative way to return cash to our shareholders at this stage is through a buyback program. We'll continue to reconsider this as we go along. That's the mindset that we have.
All right. That's great, ciao. Thank you.
Thank you.
Once again, if you wish to register for a question, please press star and one on your touch-tone telephone. For any further questions, please press star and one on your telephone. Mr. Bertoluzzo, there are no more questions. Register at this time, sir. Sir, would you like to make any closing remarks?
No. Listen, thank you to all of you for attending our call, as you've seen, a number of very important messages today. Strong performance in 2023 in a more difficult environment. I will really underline what also Bernardo said, strong performance in terms of EBITDA margin expansion, strong performance in terms of cash generation. And let me just reiterate what I said before. We remain very optimistic about the future of the business even in a more difficult environment that will be with us probably this year. Hopefully, not next year. But let's see. And for this reason, for this reason, we start to give back value to our shareholders through the buyback program that we are announcing today. And we'll continue to do so with the most appropriate ways in the longer term. Thank you to all of you.
I'm looking forward to meeting many of you, in the coming days and weeks as we go around. Thank you.