Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the first quarter of 2026 financial results presentation conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. If anyone need assistance during the conference call, they may signal an operator by pressing star and 0 on their telephone. At this time, I would like to turn the conference over to Bernardo Mingrone of Nexi. Please go ahead, sir.
Good morning, everyone. Good morning, and welcome to our first quarter 2026 results call. I'm here today with Bernardo Mingrone, our CFO, and Stefania Mantegazza, our Head of IR as usual. Let me start on slide number 3 with the key highlights of the first quarter performance. We continue to deliver profitable growth, as you can see, we'll discuss later with Bernardo as well. Our revenues grew about 1% in the quarter, year-on-year. Our underlying growth continues to grow in the region of 5%, consistently with what we discussed a couple of months ago at the Capital Markets Day, in line with our historic performance in this respect. Things change in terms of mix in our well-diversified portfolio of geographies.
Businesses help us achieve this resilient underlying growth. In this context, EBITDA also grew 2.6% in the quarter, and we continue to have margin expansion, which we'll see in a moment. In the first quarter of this year, we continued to work to shape Nexi to continue to grow profitably in the future. Our strategic initiatives, which we discussed back in March, continue to deliver and are on track, in particular on ISVs and direct channels we continue to grow. And we have strong commercial momentum in e-commerce in the front book in Germany and the DACH region, which as you know, we consider to be a very important growth engine in our group. In the process, we continue to create value for all our stakeholders and shareholders.
We are a couple of weeks away from paying our second dividend of EUR 0.30 per share dividend, an increase of 20% compared to last year when we paid EUR 0.25, total distribution of EUR 350 million. In this context, we continue to delever. We are now at 2.5x net financial debt to EBITDA, down from 2.6 at year-end. In the process, we have also started to reduce gross debt. We reimbursed about EUR 1 billion of maturities, including what we reimbursed in April with available cash balances. We can also speak of that later on. Before handing the floor over to Piergiorgio, who'll give us more details with regards to the quarterly financial performance, on slide 4.
I'd just like to take a few moments to recap and discuss a few points with regards to the fact that clearly this is my first quarterly call as CEO of Nexi, a position I took over just over a month ago. Clearly, I'm not new to the company. I presented together with Paolo back in March, our Capital Markets Day. I would like to reiterate some of the points we made during the course of the Capital Markets presentation, but also introduce, let's say, the way I view my role in the job and what I seek to achieve going forward. Some things don't change. I believe Nexi is a compelling equity story. I hope I have put cash where my mouth is.
I've bought stock over time. I've vested in Nexi stock more than 100% of the bonuses, the cash bonuses I received over the last three or four years. I believe it's a very attractive, financial investment. Based on our strong, unique positioning, I've tried to recap here some of the things we've said over time. I believe we combine in a unique fashion, European scale, and have very strong local presence characteristics, I believe are essential to be successful in Europe. I believe we are a critical, European infrastructure. Actually, to put more appropriately, we are not the infrastructure. The infrastructure is composed by, you know, central banks, market players like, you know, large customers, smaller customers, cardholders, other regulators, schemes. We're the heart of all of this.
We are very central to a very complex ecosystem of payments in Europe, and it's hard, very hard to think of us as something which can be displaced from this position. We have a very diversified portfolio of products, you know, diversified across geographies and customers, helping us deliver that resilient underlying performance. We've spoken about the difference between underlying and reporting, and we'll come back to that. We have, you know, very attractive exposure to some local MS segments, which will deliver top line growth sustainably in the future. From a financial perspective, we've also discussed this. I think we possess some characteristics, most characteristics, that you can find in many other payment companies. I think what makes us unique is the fact that you have them all under one roof at Nexi.
We continue to deliver sustainable, profitable growth. We have a very predictable, resilient cash flow and cash generation. We have now, over the last couple of years, distributed a significant amount of capital close to EUR 1.5 billion, including the dividend, which will be paid on May 20th. Our credit profile has significantly improved over time. We are now investment grade and a repeat issuer in the investment grade market. We need a clearer roadmap, I think, to close this valuation gap. I see, you know, a lot of, let's say, a big part of my role is aimed at closing this valuation gap between what I at least perceive and my colleagues perceive to be the intrinsic and true value in Nexi and what the market believes it to be.
I think I've highlighted here on this slide just three of the main areas where I believe we need to focus on in order to bridge this gap. We need to build a credible path towards our mid-single-digit revenue growth target, which we have highlighted in the Capital Markets Day. This essentially, I think, this gap between reported and underlying, we tried to make the point, has to do with certain things which happened back in the day and we are reabsorbing over last year, this year and next year, unfortunately.
We need to win your hearts and your conviction with regards to our ability to compete successfully in the long term with new entrants. That's what we discussed in terms of our ISV strategy, our direct sales force, which as I said, is delivering the kind of results we're expecting. It will obviously take time to prove the point. We're patient, continue investing in the space and continuing to deliver the results associated with it. We need to prove the resilience and the unique nature of our business and being able to work with sophisticated partners like banks in particular in Italy. We need to strengthen our relationship with them.
The vast majority of the gap between underlying and reported performance comes from what broke down at a certain point during the course of 23 and 24, but has since, I think, come a long way and mended. Indeed, we highlighted how over the last couple of years we've had a 100% success rate in terms of renewing our partnership with these all-important partners in Italy. Another key concern that I pick up when speaking with you all in the market has been the fact that our structural efficiency, I think, credit is given to us for having been able to contain costs over time.
I think there might be some skepticism out there with regards to our ability to continue this going forward, given the, you know, necessary investments to be able to bridge the gap I spoke of on revenues. Here we need to convince you that our, you know, steadfast commitment to cost control and enhanced cost efficiency is something which is structural and will continue. We'll discuss costs, I think later on.
One of the areas where I am particularly focused together with my colleagues from the ExCo, is to be as, you know, as rigorous as we can be, extremely focused on prioritizing our investments and making sure that we focus on those that create network effects and returns, rather than casting the net too wide and spreading ourselves too thin across products and geographies. Of course, you know, I think the name of the game here will be in the short term, but even more so in the medium term, about AI and how we structure ourselves to be able to adopt AI across geographies, across products and services. This is an extremely fast changing environment.
Indeed, the tools that we have today are even different to the ones that we were considering in the days leading up to the Capital Markets Day. It is a very rapidly changing environment. I believe together with my team, we need to think very hard as to how we want to structure ourselves to be able to embrace the benefits of AI. Indeed, I think we discussed this back in March.
I believe Nexi is positioned in a favorable space with regards to AI as we benefit from an asymmetry in terms of the kind of disruption which we can suffer from on the revenues front, given that most of our acquiring is in store and potentially this will have more time to adapt to AI than the e-commerce space, which will probably be most impacted by it in the short term, whereas we can benefit in the short term and the medium term, much more on the cost front. Just thinking of the kind of benefits you have in all the software space, which we are obviously a big consumer of.
AI is clearly critical to our success going forward and something I expect to be speaking with you over time a lot more. One of the other things, and I believe, you know, I've discussed this with my colleagues internally, we're now in a phase in our company's evolution where we can push back into the local regions a lot of things which we are centralizing at the time of our Capital Markets Day back in 2022 in order to gain control of our Pan-European platform, or the biggest in Europe, relatively complex, a phase which was necessary and we have now, I think, completed. We can now, I think improve our time to market and local agility by some organizational simplification which will be implemented in the coming weeks and months.
Finally on disciplined capital allocation, it's not so much the fact that we're distributing capital. I think that's a fact. You can, you know, you will be able to, you know, test it over time, the fact that we have a dividend policy which we expect to stick to. A dividend which will be paid every year and growing over time as we discussed in the past. Again, here I think I picked up at least in some conversations some concerns with regards to leverage. It is coming down, but it's still substantial. It will continue to come down given the cash generation going forward. I hope it gives you comfort that we are paying down our gross debt, as I said, EUR 1 billion now in March. Or in March and April, apologies.
We have about EUR 1.8 billion, EUR 1.9 billion of cash sitting on our balance sheet, and that will be used to, or has already started to be used to pay down that EUR 1 billion of debt. We now have a EUR 350 million dividend. We're completing or have completed the purchase of a merchant book in Italy for north of EUR 100 million. Next year, we have a EUR 0.5 billion convertible coming due in March. I expect to reimburse and use that EUR 1.8 billion, EUR 1.9 billion of cash to meet all these short-term liabilities without having to access capital markets to do so. Giving you proof, hopefully that again, cash is there to be used. It's put to its best use.
In the past, it was better to keep the cash on balance because we had a positive carry. That's no longer the case with rates having come down, we're paying down gross debt, this will continue going forward. Let me pause here because I have taken up already too much time. I'd like to hand the floor now to Piaggio, then we'll come back and take Q&A at the end of the presentation. Piaggio.
Thank you, Bernardo. Again, good morning, everyone, and thanks for joining us today. Before we turn to the result, I would like to take just a moment to briefly introduce myself, as this is my first call with you as Nexi CFO. I'm really pleased to take on this role, and I'd like to thank the board and Bernardo for their trust. I'm excited about this opportunity and very proud to be joining Nexi. Over the past few weeks, I've had the chance to get to know the company more closely, and what has struck me most is the quality of the people, the strength of the platform, and the strategic relevance of Nexi as an orchestrator and infrastructure provider within the complex and essential European payment ecosystem. This is a totally strong organization with a clear purpose and a very talented team.
While I come from a completely different industry background, I believe this will allow me to bring fresh perspective. My focus will be on working closely with Bernardo and the leadership team to ensure cost discipline, strong execution, and constructive challenge while supporting Nexi long-term value creation for all of our stakeholders. Turning now to Q1 results, I would frame the discussion around three key messages. First, growth remains solid, supported by healthy underlying trends, as we've just heard from Bernardo, despite temporary and known headwinds, as we discussed during the very recent Capital Markets Day. Second, our diversification continues to provide resilience across both businesses and geographies. Third, we are executing with discipline on costs, supporting margin and excess cash generation. With that in mind, let me start with the performance of the group in the first quarter.
Overall, we started the year with a resilient performance with solid underlying growth and sound profitability, despite the expected impact of external headwinds on net revenues related to the bank contracts effects across both Merchant Solutions and Issuing Solutions. Starting with the top line, net revenue grew by 1% year on year to about EUR 821 million, broadly in line with our expectations and consistent with the back-end loaded growth profile we outlined on our recent CMD. It is important to highlight that the underlying growth was around 5%. Looking at the top line in more detail, all businesses contributed positively on an underlying basis, with solid volume across both Merchant and Issuing activities, supported by continued structural tailwind, such as digitalization of payments and increasing card penetration across our markets.
Turning to profitability, EBITDA reached approximately EUR 397 million, up 2.6% year-on-year, with an EBITDA margin at 48.3%, supported by disciplined cost execution and some favorable phasing in the quarter, which I will comment in a while. In general, Q1 confirms the resilience of our business model, with diversification across both businesses and geographies playing a key role in supporting performance and enabling continued delivery of profitable growth. Let me now turn to Merchant Solutions, where most of the temporary headwinds are concentrated. In MS, revenue was down 1.4% year-on-year, which is broadly consistent with our expectations entering the quarter.
The decline is primarily driven, as we know, by bank-related effects in Italy, including known outflows and contract renegotiation, which had a material impact on the year-on-year comparison, and by timing of specific projects compared to last year. Let me remind you guys that about 25% of our MS revenues are not driven by volumes. H2 2026 will show a reduced impact of the bank contract effect, which, combined with the additional traction we will get from our strategic commercial initiatives, will lead to a growth acceleration in the second half of the year, as discussed during the CMD. When we look at the underlying performance, revenues grew by about 3% year-on-year, which is consistent with the underlying volume trends.
On volumes, we saw continued growth in the number of managed transactions supported by processing activities, which benefited from the ramp-up of Bancomat processing hub consolidation in Italy. This is an important development to us as it further strengthened our positioning as an infrastructure provider within the domestic payment ecosystem. At the same time, towards the end of the quarter, we observed some softness in consumer spending, particularly in Germany and Nordics, which had a limited impact on volumes. From a commercial standpoint, we are seeing encouraging signals coming from all of our growth initiatives discussed during the CMD. ISVs, direct channels, and e-commerce, in particular in Italy, are contributing positively with good commercial momentum in Germany and across geographies. Let me now move to Issuing Solutions.
In Issuing, we delivered a strong performance with the revenues increasing by almost 5% year-on-year, despite the expected negative impact from bank-related effects. Important to notice, unlike Merchant Solutions, these bank-related effects are expected to increase in the second half of the year. Therefore, we expect the full year growth of this business to be closer to low single digit in line with what we outlined in the CMD. Looking at the underlying drivers, performance was primarily supported by strong volume growth, with the value of managed transaction increasing by more than 7% year-on-year. Growth was driven by both international and domestic scheme, including the continued ramp-up of BANCOMAT, Bancomat Hub in Italy. In addition, we benefited from the completion of new client onboarding in DACH, which contributed to the performance of the quarter.
We also saw a positive impact from business initiatives, including international debit in Italy and the increasing penetration of value-added services across client portfolios. Part of the performance in the quarter was supported by favorable phasing of certain projects initiatives. Let me remind you once again that almost 50% of the revenues of this business line are not volume driven. Issuing continues to represent a structurally sound business supporting Nexi profitable growth. Moving now to DBS. DBS delivered solid and consistent performance with the revenues up 2.8% year-on-year. Growth in this segment was supported by both volumes dynamics and the contribution of new initiatives and projects. We continue to see good traction in core infrastructure services such as SEPA, clearing, and network services, which represent a key pillar for this business.
We also made further progress on strategic initiatives, including new account-to-account solutions, such as Zippay for Irish banks and verification of pay services launched last October and now impacting hundreds of banks across Europe. As a reminder, DBS is structurally even more exposed to project-based revenues compared to the other two business lines. In Q1, we enjoyed some favorable phasing. Moving now to the next slide. Let me comment on performance across geographies, where our diversification continue to be a key strength, allowing us to offset localized headwinds with growth in our regions. Starting with Italy, which is the region most impacted by bank counter effects, revenue were broadly stable. Headwind, especially in Merchant Solutions driven by these effects, were partially offset by continued growth in Issuing Solutions in DBS.
In the Nordics, revenues were slightly down year-on-year, mainly due to migration of a major issuing client at the end of 2025, as we discussed a few times in the past, as well as somewhat softer macro conditions. Importantly, underlying trends remain positive, and we continue to see growth in value-added services and on e-commerce key propositions. DACH deliver strong year-on-year growth, particularly in Germany. This was driven by solid volume dynamics and the completion of a new client onboarding and Issuing Solutions, despite a macro environment that remains somewhat challenging in terms of consumer spending, especially in the hospitality sector. CEE revenue grew at mid-single digit pace, supported by volume growth and installed base expansion. Finally, let me turn to cost performance.
On the cost side, we delivered a solid performance reflecting our continued focus on efficiency and disciplined cost control, going back to what Bernardo just said a few minutes ago. Total operating costs were flat-ish compared to last year at approximately EUR 425 million. This result was achieved despite ongoing inflationary pressure and continued investment in key strategic areas, in line with what we outlined during the CMD. Looking at the cost component, personnel cost increased by approximately 4% year-over-year, reflecting inflation, salary adjustment, and the carryover of hiring initiatives starting in 2025 and continued into Q1, aimed at supporting our strategic priorities. As we know, ISVs and direct sales, to name a few. At the same time, operating costs decreased, largely driven by efficiencies, also enabled by deployment of AI initiatives across the entire organization, as well as favorable phasing in the quarter.
It is important to highlight that part of the cost performance at this point in Q1 reflects this timing effects. As such, we would expect cost to increase over the coming quarters, both for personnel and operating costs. At the same time, we continue to see structural improvement from our ongoing efficiency program, some of which, as I said, are enabled by AI initiatives, which support our ability to manage the cost base with discipline. Overall, these are enforcing our commitment to balancing growth investment with rigorous cost control, supporting the delivery of our EBITDA and excess cash guidance over the year. Finally, we confirm our 2026 guidance with net revenues growth broadly in line with what we saw in 2025. EBITDA in absolute amount broadly stable and excess cash generation of EUR 750 million. With that, we can start the Q&A session.
The first question is from Grégoire Hermann from Barclays. Please go ahead, sir.
Thanks for taking my question. Maybe the first one would be on EBITDA. You are keeping your guide unchanged despite the growing EBITDA in Q1 already. Can you be a bit more precise on your phasing of the cost plan for the rest of the year? Do you see upside basically to your EBITDA or should we expect some more pressure for the rest of the year? Then maybe more on the Merchant Solutions performance. Can you clarify a bit the moving parts here, please? It seems like the performance in Q1 has been a bit tougher than expected. Is this only due to bank M&A? If I look at underlying growth, it seems like it's decelerating a bit.
Despite that, you maintain your guide for re-acceleration. Can you tell us when you expect an inflection point and also how this is going to phase for the rest of the year, please? Thank you.
Hi, thanks for the question. This is Pier Giorgio speaking. In terms of EBITDA, as I said, we confirm our EBITDA in absolute terms, similar to what we saw in 2025. That's the guidance. Which means, you know, since we also confirmed the growth of the top line, if you do some kind of reverse engineering, you would see that our expectations is that the cost base is gonna grow year to go by approximately again, ballpark number, 5%-6%, right? Yes, the short answer is we do expect the cost base to increase in the year to go compared to what we had in Q1. This is mainly driven by two factors.
You know, we will keep on investing in all those initiatives which we defined as strategic during the Capital Markets Day. We also had some positive phasing in Q1 that we're not expecting to see in the rest of the year. Nevertheless, our commitment, as I said, to a very disciplined cost control and cost management, when I say our, it's not just Bernardo myself, it's the entire leadership team is there to deliver what we committed to. In terms of MS phasing, I believe what we said also during the Capital Markets Day is that we expect an acceleration in the second part of the year in H2, basically for 2 reasons.
One, because we will see the initiatives that we're working on, DBS, direct sales, channel, eCom, you know, all the growth engine we've discussed about during the Capital Markets Day, gaining momentum in the second part of the year. If you look at what we call market risk, you would see that in the second part of 2025, the impact of market risk on MS was higher than what we expect in the second part of 2026, which is gonna add to our growth year-over-year. Lastly, I believe your question was about, you know, the underlying growth.
I believe what we see there, you know, if you break down the growth and the sales of MS among the volume-driven components and the non-volume driven components, you would see that 25-ish% or so of the revenues of MS are non-volume driven. Whereas last year, if you go back and look at Q1 2025, you would see that we had a bigger impact of non-volume driven components in the MS sales. Year on year, just because of phasing of project, we have a negative impact that if you do, you know, the math and do the reverse engineering, the numbers you would see is around EUR 10 million-EUR 11 million, give or take, ballpark, which is working against us.
We have a mix effect there because a part of the volume growth has been driven, and we're very proud of it, by the BANCOMAT hub in Italy, which speaks about the fact that we are really, you know, at the center, let me say, of the payment infrastructure, as Bernardo was saying at the beginning of the call. We saw, you know, especially at the end of the quarter, as I believe we discussed during the, you know, my return remarks, we saw some headwinds on consumer spending, and that is especially true for hospitality sectors in Germany and in our Nordics geography and especially in Denmark.
All of these combined, you know, give us confidence that in the following few quarters, and especially so in H2, MS will see an acceleration in its growth.
Okay. Thank you.
The next question is from Hannes Leitner, from Jefferies. Please go ahead.
Yes, thanks for letting me on, congrats to both for your new roles within Nexi. Maybe we can just drill down on the underlying metrics. When you say on group level it was 5% underlying, when we look on merchant services and we calculate those numbers, it equates to EUR 20 million merchant service headwinds. While on group it's EUR 40 million. Maybe we can just like get that down. Also what would the Nordics grown on underlying metrics if you look for the Nordea expected Nordea ramp down? That would be the first question. The second question is maybe just 1 more, a little bit more high level. Your European peer seems to have fixed their competitive structure for the moment.
What do you see in terms of pricing in the market on the SMB side? Has it been becoming more aggressive? There is also a handful of challenges which seem to be very active in Italy, but also in Germany and in other markets. Maybe you can talk to us a little bit about regional differences, competitive pressure, because you have talked quite a lot about ISV channel and then the banking channel, which is probably a little bit more protective given those contracts have longer maturity rates. Thank you.
Thanks, Hannes. Let me try and answer these questions, and then Piergiorgio Peluso can obviously chip in. By the way, thanks for your opening remarks. In terms of the underlying profitability, I think your math is more or less right in terms of, I think the exact numbers on the math is below 20, but close to 20. As a group, it's actually 30 rather than 40, but this is a question of math and so on and so forth. Doesn't change the point that you're making, clearly the biggest contributor through the gap between underlying and reported does come from MS, and it does come from Italy, and it does come from banks that we lost, and we know the name of the banks.
We've discussed them in the past. As Piergiorgio Peluso was saying, we expect that to revert in the second half on MS. As we discussed back in March, we have a second leg of this migration of this customer, which used to be a customer both in Issuing and acquiring. We will have digested and we will have lapped in the second half of this year, the exit of the Merchant Solutions, and that's when we expect the Issuing to start to kick in, which will feed into next year. The rest of the market risk comes from market customers loss comes from Issuing, as we discussed. The biggest contributor to this, I believe, is that Nordea customer, which we've also discussed.
And if you normalize the Nordics forward, which, in our
Yeah.
You know, a couple, you know, there's a bit of that in the fourth quarter, which basically hits us in the first quarter this year, but not in the first quarter of last year for, you know, migration issues from, not material overall. That's, if you normalize for these two things, Nordics would actually be slightly positive, both in terms of growth, both on the Merchant Solutions and on Issuing. I'm actually quite happy with that. Notwithstanding all the phenomena we've discussed in the past of competition, which, you know, moves to your third question. I didn't quite get the reference to our competitors, but in general, I understand it was about, you know, price competition coming from new entrants and in general competition.
as you correctly pointed out, we have a quite diverse set of distribution channels in Italy, Greece, Croatia. We distribute primarily through banks, even though there's obviously a convergence of software and payments, which speaks to the entry rights fees and so on and so forth, and the need to address the market also through direct sales channels in the Nordics and Germany, Poland, et cetera. We go direct to merchants. Nonetheless, we suffer from competition in all these channels. I would say, as you correctly pointed out, we're lucky enough to have a strong distribution partner in banks in Italy, Croatia, and Greece, which help preserve margins.
They have a strong clout on them, their merchants notwithstanding, you know, concern that as payments become more technological, ISVs will take away market share from the banks. We are accompanying the banks in being able to distribute the product, the more technological product, thanks to our work on integration with their distribution channel and with ISVs. We've also developed our own distribution channel, either direct or in partnership with ISVs, all of which is trying to, you know, accompany this migration, which is happening towards, you know, a more direct distribution channel, which has, as you correctly pointed out, overall a net lower take rate than the back book.
This has been the case for the last ten years, at least since I've been in Nexi, and we expect this trend to continue. I don't see any big discontinuity. There's no I mean, some of the competitors you often mention and talk about and ask about are not competing on price in terms of dumping. They are just formidable competitors in terms of their product, their, you know, onboarding, et cetera. And we now just need to improve and bring our game to their level where it isn't, at times it's better, to compete with them. You know, all of this is reflected both in our actual numbers and the forecasts we've given.
I wouldn't say there's anything different in this quarter compared to two months ago, the Capital Markets Day, compared to November when we had the third quarter call and so on and so forth.
Thank you.
The next question is from Sébastien Sztabowicz from Kepler Cheuvreux. Please go ahead, sir.
Yeah, hello everyone, thanks for taking my question. I've got one on the Q2 trends or the volume trends in the start of the quarter, because in Q1 you had this positive phasing effect. Could you quantify a little bit the impact on your revenue and notably on the Issuing side that was apparently a bit strong? Then you are talking about some softening consumer spending in Germany and Nordics. Could you elaborate a little bit on the trend entering Q2? The second question is on MS. When I'm looking at the take rate evolution in Q1, the take rate is declining year-on-year quite substantially. I was wondering what was the reason behind that? It is linked to your decline of big project in Q1, or can you elaborate a little bit on the take rate in MS? Thank you.
Thanks, Sébastien. I think if I look at the April numbers, I mean, like, I'm comfortable in saying that there's no big difference in what we're seeing in April compared to what we saw in the first quarter. It's very hard to glean anything into any one monthly performance for the rest of the year. I think it's hard, it's hard to really say that, I don't know, the war in Iran or what's going on in the Ukraine and the Middle East has had any meaningful impact on us. For sure, the overall environment, the overall macro environment is, you know, is not, we're not in a booming environment.
We've spoken about this in the past about how it is hitting, previously more so the Nordics than anywhere else, and previously more so Finland than anywhere else or Sweden. Now it's really more in Germany, the issue, which is what I think Giorgio was referring to when we spoke of earlier with, you know, downward revisions in terms of consumer spend, in terms of, you know, real GDP growth and and nominal. I think April, first quarter and beginning of second quarter, no big changes, I would say.
Hard to say, you know, if you look forward and you ask me about the summer and how is what's going on in the Far East or in the Persian Gulf and etc., how will that impact travel given what we read in the press on jet fuel and that kind of stuff. The truth is, I have no idea. I don't think anyone on this call can really make a certain call as to how that's gonna impact us.
What I would go back to is that we have a pretty diversified and well-hedged kind of business, both in terms of geographies, in terms of products, in terms of volume and, you know, installment or subscription-like revenues, which, you know, help us mitigate spikes and troughs in this sense. Going on to the take rate, you're right. We dropped like I think it was 1 basis point or so from 23.5 to 22.5 or something along those lines, which is honestly just, you know, given the very approximate measure of the profitability, which is calculated this way, i.e. total revenues divided by total volumes, where there's a lot of non-volume related revenues in the revenues, it's very hard to make any precise judgment.
This is not the function of a kind of wild swing of mix from, you know, a higher profitability product region channel to a lower one. It's the compounding of a number of effects. For sure, I think Giorgio mentioned, you know, the impact in terms of volumes that we're seeing, more domestic scheme volumes in Italy. These are lower profitability, so that speak in that respect to a kind of, you know, mix effect. There's also, you know, seasonality. I mean, we have, you know, when you actually implement value-added services, repricing tends to be maybe not in the first part of the year, maybe in the summer and later on, and this would affect it.
Just like we don't give guidance on a quarterly basis, but look at and manage our P&L at least on a yearly basis, if not multi-year basis, given the nature of business, I caution you also not to read too much into a quarterly swing. There's nothing specific you should worry about it. We point to a broad stability of the take rate, which is our medium-term target.
On the phasing effect in the issuing, was it very big in Q1? Just to understand the dynamic entering Q2 for issuing.
Yeah, as we said, we had, you know, I think the, you shouldn't worry about, you know, project work and stuff like that, which, you know, project work for instance, you know, we had Popolare Sondrio was bought by BPER Banca, right? They need to migrate on the, what was it? I think the 13th, 14th of April, they migrated all their book, from, you know, Sondrio to BPER Banca, and we earned money by helping them and do so. This will be booked in the second quarter. Last year, in the first quarter, we would have had other project work maybe related to some other customers. There will be a bit of that.
I think the most important thing that you should think of in issuing is what we discussed earlier about the big bank, single, that we lost, they will start migrating. Its card portfolio has started, but it will pick up in the coming months from us to our competitor. That is the real impact in the second quarter and second half of the year on issuing.
Thanks. I would
Sure.
The next person is from Justin Forsythe of UBS. Please go ahead, sir.
Good morning. Congrats to you, Bernardo, as well as you, Piergiorgio, for the new roles. Thank you so much for having me here. A few questions, if I might. Piergiorgio, I just want to come back to this underlying growth and make sure we understand the moving components correctly. If I understand it, you're talking a little bit about the project-related benefits that were in the prior year base in Merchant Solutions. Was that a EUR 10 million or EUR 11 million impact on that aspect of the business specifically? If you normalize for that, you would have been closer to the underlying growth.
I understand you flagged a smidge of weakness coming out of March, which wouldn't have really moved the needle, as you said, the relative moving pieces to get you from underlying MS 4Q through to 1Q, and also the fact that the underlying transaction volumes in MS remain quite steady. I guess, Bernardo, you mentioned a little bit around the take rate of domestic schemes relative to international schemes. Maybe that played a role as well. I just wanted to hone in a little bit on the macro. Totally appreciate all of the comments that you've just made around not really seeing anything. I guess it feels like a lot of investors are fearful of luxury-related spend levels and inbound tourism, so second derivative type of spend off of travel.
I would have thought that that was something that maybe would be impacted. Sounds like you're not seeing that at all or very minimally, say, in Italy. Maybe you could put a finer point on that. Just one point on the positive offsets, maybe you could give us some detail on or remind us on the percentage of your mix exposed to fuel, meaning processing payments for gas stations like Eni and others in the portfolio. Just one final one. Wanted to understand a little bit more around the Bancomat Hub in Italy. I mean, you mentioned it a few different times. Does this have to do with the modernization efforts at BANCOMAT? Are you seeing that across all of your business lines?
Like maybe you could quantify a little bit the benefit you expect to see from that going forward? Thanks.
Sorry, Justin. We're just divvying up your many questions. Well, thanks for thanks for your opening remarks as well. Let me, let me just quickly talk about take rate, macro effect on tourism, luxury spend, that kind of stuff, and the Bancomat Hub. The Bancomat Hub and the take rate comment I was making earlier is actually are tied to one another. We do a number of things for Bancomat. For Bancomat, we are basically the sole provider of IT. Bancomat is a scheme, and we do the processing of that scheme on issuing and acquiring 100% of it. This is being consolidated onto our hub over time when Bancomat went through its own transformation and used to have 3 processors, and now there's only 1, and we are that 1.
We are bringing on board volumes that previously were processed by other processors. And this feeds into the take rate discussion I was mentioning earlier. We have greater volumes because we're now processing more volumes on a largely kind of fixed kind of revenue base with Bancomat. It's actually not that fixed because it's growing, but, you know, you understand what I mean. The take rate on that processing volume is much lower because it's pure processing. The volume uplift is pretty big, and that dilutes, let's say, the take rate in this quarter. With regards to Bancomat, yes, it is what you're suggesting. I.e., the upgrade in technology. Bancomat now offers a number of features it didn't use to offer and has ambitions to do more.
Just like we do this kind of work for Bancomat in Italy, we are obviously present in more than one European jurisdiction. We do the same kind of work for our customers, whether they be schemes, or customers in other countries as well, so helping them upgrade their technology to new requirements. On the macro effect, I mean, you're right. I mean, I mentioned it. I hope I was transparent and honest about it. We don't have, you know, a clear answer to your question, how is what's going on in the Middle East gonna impact us in terms of tourism over the course of the summer.
I haven't any evidence that there's been huge levels of cancellations or anything in that respect in terms of some of the countries which is most impacted by tourism for us. Our home market here in Italy and in Greece, anecdotally, we're, you know, trying to book a board meeting in Rome, and we can't find a free hotel to do it. I don't know whether it's, you know, from the U.S. or European tourists, but that doesn't seem to have fed through yet, but we'll need to see. In terms of, you know, the kind of pure Middle East volumes in that impact us, we're talking, you know, a small fraction of a percentage point in terms of volumes, right?
The overall kind of EU kind of volumes are less than 10% in total. Obviously it would be meaningful if they were to be zeroed as they did during COVID, but I don't expect that to happen even though the jury's still out. On the luxury front, please bear in mind that is kind of especially if you're thinking of some of the more global luxury brands, et cetera, that is where we compete less well, if you want, where we would lose out less because some of our competitors, one in particular, is not a monopolist but has a big share of that market. It's not where we compete the most.
Overall, I'm pretty, I mean, I'm not, you know, overly worried about it yet, but this is based on the current set of information. We'll see going forward if things change. You asked about the gas distribution. I can say that, you know, the Italian company, the largest Italian company in the space accounts for about, I'd say, EUR 10 million or so of annual revenues, and it's very diversified across the board. Obviously, it's driven primarily by refueling at the station, but it's not just the commission we earn on the fuel. It's also all kinds of things we charge them for, including running their loyalty scheme or, you know, the e-commerce gateway they have and so on and so forth.
Not 100% of that revenue is generated from fuel. What you actually end up seeing, even though people might travel less, they spend more for the fuel they're paying, and therefore, ultimately, in terms of value of transaction, we'll probably see less liters of fuel being sold, but the value of the transactions probably will remain similar to what it has been in the past. I don't expect that to impact us materially. Let me hand the floor over to Piergiorgio Peluso to answer your question on underlying versus reported.
Yeah. Thank you, Bernardo. I believe, if you go back and look at what we reported in Q1 2025, I believe we have a very nice slide in our deck where we say how much of the revenue is volume-driven and how much is non-volume driven. You would see that in Q1 2025, 27%-28%, off the top of my head, of MS revenues were non-volume driven. What we're seeing in Q1 2026 is 25%-ish, again, off the top of my head. If you do the math on MS revenues, you would see that, you know, the difference between the two quarter is around-ish, I don't know, you know, EUR 10 million, I think, last time I did the calculation, which is the phasing effect I was discussing about.
Once you strip it out and you try to understand and to compare the value of managed transaction vis-a-vis, you know, how our performance is going on the part of the MS revenue, which is volume-driven, you're almost there. What you see as a difference basically is due, once again, to national scheme growth, which Bernardo just commented, right? I believe he also made a few comments on how we get remunerated from those transactions. That is explaining, I would say, a big chunk of that of that variance.
Got it. That's incredibly helpful both. Just one quick clarifier on the project related stuff. I thought that was mostly on the issuing side. Maybe you could just provide an example of the type of project work that you do on the merchant side. Thank you.
On the merchant side, it's primarily with locker customers, and it can be, you know, many things, you know, within that, within that space, not volume driven to allow them to accept new schemes. I don't know, to, you know, their gateway on the e-commerce front. Might be with a bank in terms of some development for the banks. I mean, it's smaller. It's not like, you know, the bigger projects, as we were mentioning, are related to tend to be related to a bank M&A on the issuing front, indeed. That's, you know, somewhere in the region of between 5 and 10 million EUR. Whereas on the Merchant Solutions, it's much smaller and it's much more polarized.
Incredible. Thank you so much for all the detail. That's really appreciated.
Thanks, Justin.
The next question is from Pavan Daswani of Citi. Please go ahead, sir.
Hi, Bernardo and Piergiorgio. Thanks for taking my questions. I've got a couple. Firstly, on the guidance assumptions, you flagged seeing some weaker consumer pockets, but kept the guidance unchanged. Could you talk about the macro assumptions that are baked into your full year guidance? Also just remind us of your revenue exposure to travel. Sorry if I missed that number. Secondly, Germany continues to grow well despite the softer consumer trends that you touched on. Can you talk a bit about what's driving that and the sustainability of that growth looking forward?
Thanks, Pavan. I mean, the guidance is unchanged. You know, as I said, we're just in the first quarter of the year and, you know, just to be clear, the guidance isn't changed, but Pier Giorgio, myself, the rest of the team, we're all working to do better than your expectations and our expectations, and hopefully we'll succeed. I would say the first quarter of the year started off well, in particular on cost. You know, hopefully we will over-deliver. The underlying assumptions on this are, I would say, you know, the ones I think we discussed them briefly at our Capital Markets Day, but we believe to be conservative.
To be fair, if you look at the macro, you know, forecast today by international agencies, they're slightly worse than they were only a couple of months ago for the year and looking forward. In particular, I think the biggest swing I noticed was in Germany, as we have pointed out. Indeed, when you go to Germany, you do read about layoffs and bankruptcies and the likes. I would say the environment is slightly worse than what we were baking into our guidance. You know, it doesn't lead me to say that it's so material that I would like to change it. I would stick to that. No.
Then again, let's see what happens in the Gulf because, you know, every day that passes, you get a new piece of news. As things stand, I go back to what I was discussing when Justin asked the question. With regards to Germany, you know, I think just simply put, the way I think of it and the way we always think about it here is, you know, when you are in a market like Italy or Denmark, where you're the incumbent player, in order just to maintain that market share you have, you need to win, you know, 50% plus or whatever your market share is, of new RFPs, new contracts, and it's incredibly hard to increase your market share. Indeed, we are suffering some erosion of it coming from new competitions.
We have the exact opposite situation in countries like Germany, where, you know, we start from a 10% market share. If I win 11% of RFPs out there, I'm already increasing my market share. It's a lot easier. This is off the back of a lot of work we've put into having the right products, the right leadership. You know, Thomas was on board, he's been on board now for a year, and he's doing a great job in terms of, you know, of driving the sales effort in Germany. You know, to be fair, that 12% growth you've seen in the quarter is not a 100% MS.
A lot of it, or a part of it at least, comes from ramping up an issuing customer we won back in the day in Germany is now coming into full swing, so there's some benefit there. We are growing more than the market, which means we are winning market share thanks to our sales effort across the channels. In particular, I think the ISV channel and partners channel in Germany is actually growing very substantially, off a very small base, but very substantially. Our direct sales force is doing well, and our products are such that we can win in the market. In Germany, by the way, we also have a pretty full kind of spectrum of offerings. We also own a company called orderbird, which is native ISV in the restaurant space.
We bought last year Computop, which is the largest gateway. All of these things contribute to success in Germany. Let me hand the floor over to Piergiorgio Peluso with regards to travel.
Thank you, Bernardo, and thanks for the question. You have different exposures across different geographies, obviously, but if you want to take a ballpark number, I would say 10%-15% of our MS revenues are exposed to travelers. Very difficult to say how much of that is domestic, in a sense, travelers, how much is international. It's very difficult if you're trying to correlate that to what is going to happen if, because of what we are seeing in the Persian Gulf, we will see some headwind in terms of vacations and people moving around. Long story short, ballpark number, 10%-ish of our MS revenues are linked to travels and transportations.
I think it's fair, Giorgio, to say, you know, just to go back to this question on the panel, that 10%-15% includes also taxis, mobility, all kinds of things.
Yeah.
So it's not just-
Yeah.
You know, the flight from Dubai to Rome.
Yeah.
Which everyone's worried about. Thanks. Shall we move on to the next question? Thanks.
The next question is from Alexandre Faure, BNP Paribas. Please go ahead.
Good morning. Thank you very much for squeezing me in. I got a couple of questions, please. Firstly, on the change in net debt in Q1, which I know is not a great proxy to excess cash generation, I think you had an earn-out payment in the quarter relating to the Alpha acquisition. Could you just remind us of how much that was? Second question is going back to, you know, the latter part of your introductory remarks, Bernardo, when you talked about capital allocation and you mentioned the EUR 1.9 billion of gross cash at the end of Q1 and paying down the upcoming maturities in April, paying the dividends and the 2027 maturities as well.
I mean, if I do a very rough back of the envelope calculation, it feels like you'll end 2027 with, say, EUR 1 billion-1.1 billion in gross cash. Is it how you think about the minimum operating cash that Nexi needs or you could take that further down? Thank you very much.
I'm not sure I followed 100% of your math, but let me try and answer what I think is, you know, what you're trying to get to. I mean, let's start with the detailed questions you asked about the earn-out, and we have paid, I think in total this year, it's between EUR 20 million and EUR 30 million tied to the acquisition of the Alpha Bank book back in 2021 or 2022, if I remember correctly. That was obviously part of it was paid, most of it was paid, I would say in the first quarter. There's another payment, I think, in the second half, a smaller amount payable in the second half. In total, between EUR 20 and EUR 30.
Stefania can go back to you with the precise number. In general, you should look at the dynamics of our net debt or cash generation as well as, you know, clearly, first point, the gross debt includes also non-cash, let's say, debt, non-financial debt, so IFRS 16 and the likes, which increased in the first quarter, which you should strip out if you're trying to figure out how much cash you generated in the quarter. We paid down part of that EUR 957, EUR 967 was paid actually in March. It was a loan from, if I remember correctly.
CDP. Part of that fed into it. There's a few moving parts that you should consider within the quarter. The way I look at our cash balance, and I made a point in my opening remarks, you know, think of that EUR 1.9 billion that we have on balance sheet now. That is going to serve more than, you know, EUR 2 billion of payables, which come due between now and next year, this time next year. You know, EUR one and a half billion of gross indebtedness to be paid down, you know, the dividend this year, the M&A, the earn-outs, and so on and so forth.
We can do that without having to tap capital markets. I hope that gives you kind of comfort that the cash which is there is 100% available, none of it is trapped, et cetera. We have to deal with the mechanics of how we actually get that cash to pay the debt or pay the earn-out, et cetera. The easiest way is to wait for dividends to be, you know, paid up by the subsidiaries to Nexi as a parent company. Nexi as a parent company only needs cash to pay salaries for the few people that are employed by Nexi and pay the coupons on the dividends.
Nexi as a parent company only needs EUR few hundred million of cash on its balance sheet, and then every operating company needs, you know, Some cash to manage, you know, salaries and so on and so forth. My estimate, we don't have a precise figure, is less than EUR half a billion at any given time. Why do we run more cash? Timing. You know, when is the right time to tap capital markets to issue a bond? Do I bridge that with some bank loan between now and when the market opens? It's just pure treasury management. I hope that answers your question.
Yes. Thanks. Thanks, Bernardo.
Thanks.
The next question is from Aditya Buddhavarapu from Bank of America. Please go ahead.
Hi, good morning, Bernardo, Piergiorgio. Thanks for taking my question. Three from my side. Firstly, could you just talk about the trend you're seeing in Central and Eastern Europe? You mentioned that some unfavorable volume mix and pricing impacts in Poland. If you could just expand on that. Second, you talked about expanding the direct sales force in Italy and other markets. Could you just maybe talk about how that's progressing year to date and maybe the phasing of that during the year, as you think about the cost line? Finally, as you think about the portfolio role, Bernardo, across all three segments, is there anything which maybe, you know, you still think of as non-core?
I mean, parts of DBS maybe, but any other parts of maybe MS or issuing as well, which you think could be, less strategic, going forward?
Aditya, let me answer the portfolio rationalization direct sales force, and then I'll have a floor on the details of what went on in Poland in terms of mix et cetera, to Piergiorgio or so. On the portfolio rationalization, we came to the conclusion at the end of last year that we weren't gonna sell DBS.
Indeed, going forward, I think also given the evolution we've seen in the payment space, it might have actually been a blessing in disguise, given the centrality of the discussion on payment sovereignty in Europe and the space we wanna really claim in terms of our role as, you know, as an orchestrator, as a key element of the European payments ecosystem and the role that the DBS can play in that in the digital euro, in account to account payments, and all the like.
I think, actually, you know, DBS, from being an asset which, you know, had attracted attention because of its merits, is now an asset that we have and that we intend to grow and invest into its full potential. There is also, you know, I would say reasons why we didn't sell it related to the role it actually plays within the overall European ecosystem that, you know, kind of prevent us from selling that kind of asset.
Within DBS, we've always said there are some smaller pieces which are less core, less strategic for us and we might sell, but none of them are so large that you should worry about it as being impactful in terms of our strategy going forward and our results. It's really about just housekeeping for us and simplifying our business. On the direct sales force, we are approximately 500 strong, if I remember correctly, as a group, about 300 of them are in Italy. The rest are in Germany and Nordics, et cetera. We are planning to more or less double that sales force over the course of our plan period. We are progressing in that direction.
I think, you know, I wouldn't call it a linear progression, it's more up-fronted, but I think that's one of those areas where in trying to manage our P&L during the course of any given year to meet or beat our objectives, it's one of those areas where I would be more inclined to kind of ring-fence them and continue steaming ahead because I believe that's where a lot of value lies. Let me hand the floor over to Piergiorgio on CEE dynamics.
I believe the question was specific from Poland, if I got it right. In Poland, as I believe we said in the past, we serve the largest e-com marketplace there, and also one of the leading platform overall in Central Europe. We are the gateway for wide gateway services for that, for that customer of ours. What we are seeing is that in terms of volumes, that customer is now starting from 2025 actually, because I believe this has been discussed in the past as well, open up its offering using different gateways.
We see a volume reduction there, but in terms of impact on the revenue, very minimal because the margins we were making there were pretty, you know, pretty low compared to other business we do with different customers. On top of that, overall in Poland, this is not specifically to us, what we see is more customers using local account to account schemes. It's a mix which everybody in Poland is kind of going through. As since you have this kind of shift of some volumes to this A2A scheme, account to account scheme, that's gonna have an impact, a slight impact on the revenues as well.
Overall, Poland remain a very strong market for us, and it keeps growing very nicely and according to our expectations.
Thanks. Let's move on to the next question.
Next question is from Antonio Gianfrancesco, from Intermonte. Please go ahead, sir.
Good morning, and thank you for taking my questions. Several of my questions have already been addressed, so, just one from my side. It is on capital allocation, because you confirmed the guidance, but do not explicitly mention the 5% plus year-on-year dividend growth indication provided at CMD. It would be helpful to clarify whether that dividend growth framework is also fully confirmed for next years. Thank you.
Thanks, Antonio. Easy one. Yes. Let me just take the, you know, your question and turn it. You know, I think one of the things we said at the Capital Markets Day was that this was a kind of floor that we tend to stick to, so growing dividend by at least 5% every year. Remember that in our projections, we only accounted for, you know, if you multiply it out, a portion of the excess cash we expect to generate. We said the remaining excess cash that we expect to generate, so that which isn't distributed as part of the, you know, 5% growing dividend, over time, we would consider on a year-by-year basis in terms of what to do with it.
You know, pay down debt, maybe there's some super creative M&A which today doesn't exist but may appear. Maybe we reconsider buybacks or maybe we distribute a special dividend. That is a kind of floor which we are committed to, the board is committed to. I think it's entirely consistent with discussions we have with all constituencies, including, you know, debt holders and rating agencies, but we hope to do better. Okay. Thank you very much, everyone, for your time today, and look forward to meeting with Piergiorgio and Stefania, many of you over the coming days and weeks. Thank you very much.
Thank you.
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