Good morning, everybody. Thank you once again, as always, for joining us on this Friday morning as we discuss the TXT Group's Q1 Results for 2023. As always, we will have Daniele Misani, CEO of TXT Group, here live with me, also Andrea Favini, Investor Relations, joining us from our Paris office in Berlin. If you have any questions, please leave them in the live event Q&A section. At the end, we will always read them out. Preference will also be given to those questions who leave a full name and surname. Please work with all of your questions and let us know if you've anything to say. Thank you very much. We might just wait another couple of minutes for the last few people to join us before beginning the presentation with Daniele.
Thank you very much. Thank you, Bridget.
Thank you.
Thank you, everybody that is connected. While waiting for some people joining, to the meeting. I want to thank you. As you know, the shareholder meeting, in April, selected also a new course with a new board. There was, let's say, the continuity in the top management. Yesterday, the new board appointed Enrico Magni again as Chairman and again, me for other three years after the first three years period that was very good, because brought value for all the people of the TXT Group and of course for customer and of course for you as shareholders. We are very happy to continue. Our commitment is to continue with this grow accelerated path.
The first quarter results are in line, let's say, with the expectation that are, let's say, strong and good expectations, and also the results are very good. I will start to have a vision of the numbers that were presented and approved yesterday by the board. In terms of volumes of revenues, there is a good achievement. We closed the first quarter with EUR 52.3 million in growth of about 71% with respect to the same period of the last year. Is a strong growth that is coming from all the areas of the business that we have according to the segmentation that we always presented in the past. Divided by market, we have a growth in all industries.
The strong growth, driven for the aerospace and aviation industry in general is because we started to aggregate the data coming from Ennova in this division. As already told in the past, we will start, and we have started to provide a new segmentation that I will introduce later in order to understand better the business, not according to the industry, but according to the offering type. In terms of profitability also, that is very important for us. We registered a very good growth also in this direction, so +52% with respect same period of the last year. We closed the first quarter at EUR 6.8 million. I tell you that, as you know, our business is also linked to seasonality. First quarter in general is the slower one.
Good results for the first quarter are a good first step for having good results in the overall year. We are on the right track in order to continue to bring value. As I told you, the complexity of the Group is growing. It's growing in terms of offering, it's growing in terms of market reach and of course, industries that we serve. We are a technological company, so we are a digital enabler, and we are in the market of digital innovation that is not bounded to a single industry, but is open to the innovation in many fields, thanks to the technology. In order to reflect this approach, and this is our market positioning, we decided, and we are reorganizing the, let's say, the Group according to offering type. We have three main offering lines.
Digital Advisory that is more related to process innovation, so the usage of technology in order to innovate customer processes, so they know how to transform processes by using the digital technology. This, let's say, business is 13% of the overall. This percentage is related to the numbers of the first quarter. We have a strong competence in the area that is related to Software Engineering. This is our D&A. TXT was born as a Software Engineering company. We offer services to customer to transform their product. Okay? This is the bigger division in terms of number of people, and is more or less 70% of the business itself. Together, Digital Advisory and Software Engineering are service businesses. We provide services and intellectual property, in most of the cases remain on customer.
Instead we want to give an edge with respect also to the competition, because our value proposition is empowered by our portfolio Smart Solutions. Proprietary software that we use in order to accelerate the transformation of processes and customer products. The Smart Solutions, let's say, unit is worth more or less 20% of the overall business. This is the cluster of companies that are investing in proprietary technology. Proprietary software. The R&D is mostly focused in this division. These three areas will be the segmentation that we present to you in the next three years. It's also a vision of our approach to the market. We are a digital enabler that can serve and offer solution to the customers end to end.
Starting from the conceptualization, so advisory, engineering, in order to implement, boosted by Smart Solution that are vertical solution that accelerate the customer transformation. If we look to the numbers according to this segmentation, we have a good performance and growth in all the areas also. Looking at to the three segments, Smart Solution, Digital Aviation, and Software Engineering. Software Engineering is the bigger, with volumes about 36.3%. The smaller one for now is Advisory, because for the Advisory, we started to do this business starting from 2020, but is a business strategic for us, we are investing, we want to continue to grow. In terms of profitability, these cluster are more, let's say, homogeneous with respect to the market vision that we had before.
The target for the software engineering is above 10% in terms of EBITDA margin, and we close with 12%. There is a slight decrease with respect to the past because the aggregation, the mix of different companies, and especially Ennova, that was the latest one, introduced mixed up with some areas in which our Software Engineering were more performant, like the defense one. The overall mix is 12%, but we are working with the synergies and integrations in order to improve and to continue with good track on this topic. In terms of marginality of Digital Advisory, we are improving. We are growing in size, and we are growing also in marginality, and we close 14% more or less for this division.
Products are still especially because it's the first quarter of the year in which there are less software deals. The typical life cycle of selling license of software is more, let's say, strong in the last part of the year with respect of the beginning of the year. Having expanded also all the R&D expenses to produce our software, we still close with a clean 15% of EBITDA margin, with EUR 1.4 million in EBITDA in this segment. There is a strong contribution looking to the numbers of all the division that are growing well in either enough in revenues then in profitability.
In terms of other KPI that are important to highlight to you, we have the performance related to the organic growth. To the growth like to like perimeter, same perimeter of first quarter 2022, we register a double-digit growth, so +11%, driven by all the segments. A strong double-digit growth in all the segments is a good results, and we want to push and continue in this direction. The contribution coming in terms of revenues or volumes of the new acquisition, so Ennova, SPS, DM Management, Tlogos, and P.G.M.D. that were acquired in the second half of the last year, is significant in terms of volume, and is +EUR 18 million.
In terms of net profits, we have a very good results, EUR 2.9 million, that is 6% of the revenue. In line with our historical results, and is strongly growth in terms of absolute value with respect to the first quarter of 2022 of more than 40%. Very good value brought also for all the shareholders. R&D is important. As said before, for us, the Smart Solutions division is a strong value proposition that put us in front of competition in many fields with our vertical solution. We invested EUR 2.2 million in growth with respect to the same period of the last year, plus 16%.
The revenues coming from this division is significant, EUR 9.3 million + 7% with respect to the same period of the last year. More than the growth and the value that we bring with the revenues from software, for us, it's important to have this kind of offering because is something that puts us ahead of competition in most of the cases. Is an entry point of high value in front of large customer in order to offer them additional services. To enable the synergies, so to sell digital advisors or Digital Advisory services, or to sell Software Engineering services. For us is a strategic asset to propose to the market Smart Solutions. In terms of revenues, we have EUR 10 million coming from international revenues.
In terms of percentage, let's say, with respect to the past, we have less, let's say, percentage from outside the domestic market, the Italian market. It's 20% with respect to the total. This because the mix of the company, especially because the bigger company we acquired and integrated last year, are mainly focused on the domestic market. For us, still the international presence is, let's say, a must, and we are looking also to continue to invest and to expand the presence outside from Italy. In terms of debt, we have a very strong result in the first quarter due mainly from the tradable payables that are being closed and paid in the first quarter.
Our net debt, not adjusted, is EUR 25 million as a debt, but I have to remember to you that we have a very important number of treasury shares. We are implementing our buyback plan by acquiring our own shares. The value approximately of the shares that we own now is more or less EUR 19 million. Almost EUR 20 million in treasury shares, and we will use these shares in order to continue our M&A campaign. To acquire new company during 2023. Plus, we adjusted also in the number we presented, the number of the net debt, by the means of the financial investment that we have in Banca del Fucino, you know, that is worth at the fair value of EUR 60 million.
Given that we have a negative net financial position, but sustainable, with the assumptions that I shared with you in order to continue our buy and bid plan of companies within the ecosystem of the TXT Group. I said before, the vision about market was limited because the configuration of today of the TXT Group is a multi-industry technological company. Aerospace and Defense remains, let's say, the bread and butter, the area of high expertise that is 25% of the total. The present in the other industry segment is growing. Industrial automotive is more or less 10%. Banking and finance is 23%. 11% comes from the public sector. That is a strategic domain for us for growth.
We added with the entry of Ennova and SPS, also the telco and media landscape for the industry offering. Even if I want to point out that this 32% is driven mainly by the big telco customer that are our first customer. With this customer, like Telecom Italia, for example, we don't just offer services for them, but we work with them to reach other industries. They are a sort of vehicle, commercial vehicle to serve with Software Engineering and Digital Advisory services all the other industries. For the telco, we provide services to the telco company, but we work with them, with the market in order to bring services and values to the rest of the industries.
Some events for the first quarter, I want to point out, and I'll update you about the recovery funds, that we reached with the bid that we won that was announced a few months ago, that is focused on the activities for the central ministry. The public public administration, central public administration, that brought the first results also in the first quarter, because we ramp up the team and the performances of the company that is mainly focused on this topic that is HSPI, are very positive in terms of growth. I said before that the overall average growth is 11% in terms of organic. HSPI growth about 24%.
A very strong increase of volumes, driven by the, let's say, the implementation, the starting of the projects related to the recovery fund. A very strong and positive result that is just the beginning because, as already communicated, these kind of programs have, let's say, a first phase of startup, then a peak, and then will close. We are still in the phase of ramp-up, and the most of the results will be seen next year. It's a long-term project, so, that we are starting with the right pace. We are, we are growing and we are serving, we are starting up the projects, we are hiring, and we are providing value, according to the needs of this kind of, big, project that we won.
This project is strategic, of course, because is in demand and PMO services for all the transformation of the public sector. As an overall, let's say, reachable revenue targets of EUR 120 million, of which one part is for us, at least more than 60% is on us. We are working in the right track in order to capture this big opportunity for growth that will make grow also our presence into the Digital Advisory offering for the public sector. In terms of other, let's say, project beside the projects that we are bringing to our historical customers and to the new ones that we are acquiring, I want to point out to some innovative projects coming from public funding source in this case.
This one that we won during the first quarter that is related to technologies, enabling technologies like artificial intelligence and extended reality. For us is very important and strategic because we participate to these large projects in order to improve also our capability to reach the market in our solutions, in our Smart Solutions. We are empowering our Smart Solutions in big funded projects that can boost to our platforms. In terms of SOFIA, is a strong project in the industrial field in which we have player like CNH that are using these new enablers like artificial intelligence, extended reality, to improve their processes and their products. The overall project in this case is EUR 5 billion, of which 20% is for the group companies that are participating to it.
Another example of funded projects that are enabling us is related to another project, more international, in this case, focused on defense. In this case, in particular, is a big project worth more than EUR 50 million, in which there are main players of the defense market. The Italian players here are Avio or Leonardo. There is Saab and other leading research institutions that are participating to this project. Is in focus with our, let's say, strategic goal of sustainability and green aviation. That is one of the field in which we are investing, and we are driving the development of our products.
is focused on the design of the new propulsion for aviation, so we are speaking of hybrid electrification, hydrogen, so all the new propulsion, let's say, trends that are coming in order to do the, you know, clean aviation. In this case, we are the technological part-partner offering the digital platform. That is our products coming from base related to the design, preliminary design of aircraft. This platform will be a standard for all the companies within the consortium in order to build and to design models that will be implemented in the next few years. We are in a position, preferred position also to be, let's say, to start to work on future projects of aircraft, so to give continuity to our business also in the other area.
This is a project in which of the overall, let's say budget of EUR 50 million, we will take more or less 5% in the next few years. It's very important because it will put us on the main aviation programs that will start in the next future and will empower our technology. Our software platform that is used to do this sustainability design strengthen the positioning on the market itself of the platforms. In terms of another topic that I want to address that is more related to cost, but it means that we are trying to position ourselves very strong in the market with this new brand and this new size and the extended offering.
We restarted after a period in which, let's say, the presence also in trade show or events was limited. We were starting again to invest and to continue to put our, let's say, new offering in front of the market in many events. Our team, our ecosystems, is attending the major, let's say, events for each sector in which we are. There is a strong commitment about the overall, let's say, organization in order to reach customer, to share with customer our vision, to listen to customer in order to understand which are the real needs they have. We capture lot of opportunity on the market itself, we are committed to continue to invest in our sustainability plan in order to continue to grow in all the segment in which we are present.
This is for the overall, let's say, business and performance review. I will ask Andrea from Berlin to join and to highlight a little bit more in detail the financials. Thank you. Thank you very much. I wait for any question in the Q&A chat. I will answer to you after the Andrea speak. Thank you very much.
Thank you, Daniele, welcome everybody to the financial section of this conference call, during which we will focus on the performances of the group in the first three months of 2023. Starting from the profit and loss of the period, revenue of the first quarter of 2023 were equal to EUR 52.3 million, up 71.4% compared to the first quarter of 2022, with a strong contribution coming of course from the company acquired in the second half of 2022. Excluding the company, the new acquired company, the revenue grew at 11% compared to the first quarter of 2022.
If we look at the direct cost, the first quarter of 2023 recorded a significant growth that outperformed the growth of revenues, the growth was equal to 82.6%, that led to a decrease in the gross margin as a percentage of revenues by a 4.1 percentage point. The gross margin in the first quarter of 2023 was equal to 34%, equals to EUR 17.8 million, versus a 38.1% in the first quarter of 2022, with a gross margin of EUR 11.6 million.
As explained earlier by Daniele, this effect is merely related to the consolidation from Q4 2022 of the new acquired company with a different mix of cost and revenues and a dilution of the revenues coming from, let's say, proprietary software business with a higher gross margin. This effect is partially offset by the lower incidence of indirect cost, mainly R&D and commercial cost of the new acquired company against the company that were already in the consolidation perimeter in the first quarter of 2022.
In fact, if we look at the EBITDA margin of the period, it decreased by 1.6 percentage point lower, of course, compared to the 4.1 percentage point decrease in the gross margin. We focus, for example, on the R&D development cost, the growth of 15.8% was mainly driven by the growth in the Smart Solutions business with the return on the investment expected mainly on the second half of the year. In fact, the Smart Solutions business grew by 7% in the quarter, with the growth in the R&D investment by 16%, with an expected return in the next quarters.
If we look at the commercial, the commercial cost, the commercial investment, we recorded a significant growth of 44.4%, which is, of course, partially also coming from the consolidation of the new acquired companies, which, let's say, structure is linear compared to the business coming from, for example, the Smart Solutions and Digital Advisory divisions. General administrative cost increased by a significant rate, 103.4%, but in terms of incidence on revenues, it remained constant compared to the full year of 2022 and to the latest quarter of 2022. There is, of course, some impact coming from the ongoing integration of the new acquired companies within the TXT ecosystem.
Also there are high costs related to the scouting of new opportunities, due diligences and all other costs related to the M&A plan. Said that, we expect that the 8% is, let's say, sustainable value of general administrative cost, and it will be, let's say, a target also for the full year 2023. If we look at the depreciation and amortization, there is a significant growth by 96.3%, and in the EUR 2.4 million as of March 31st, 2023, there are EUR 0.9 million of amortization of intangibles, of which EUR 0.7 million consisted of amortization of Purchase Price Allocation, meaning goodwill allocated to other intangibles.
Other than that, there is EUR 1.3 million of depreciation of tangible assets with an increase also related to the M&A plan of 2022, and the residual value of EUR 0.2 million is related to impairment losses. Looking at the operating profit, we recorded a growth of 39% and the EBIT was 8.6% in the first quarter 2023 versus a 10.5% in the first quarter of 2022. Financial charges grew by 53% and are equal to EUR 0.4 million in the first quarter of 2023 versus EUR 0.3 million in the first quarter of 2022.
With a tax rate that remained constant in the first quarter 2023 against the first quarter of 2022 to approximately 28% of the pre-tax income. Net profit was equal to EUR 2.9 million in the first quarter of 2023, up 40% compared to the first quarter of the previous year. If we move to the net financial net financial debt as of March 31st, 2022, the unadjusted net debt was EUR 24.6 million, a reduction of EUR 13.6 million compared to the year end 2022. That was mainly this coming from the cash generated by the operation and the reduction in the net working capital that we will address in the next slide.
If we look at the cash, equal to EUR 46 million, it's up EUR 12.9 million compared to the year end of 2022, and it consists mainly on bank accounts held in euro with the major Italian banks. The securities at fair value consist of investment in the multi-segment insurance pool with a partially guaranteed capital, government securities and bonds with an overall medium low risk profile, and for a residual part, a bond loan. The short-term financial debts are equal to EUR 55.9 million, up EUR 4.7 million, and are included EUR 4.4 million of IFRS 16 liabilities, and EUR 2.5 million are short-term financial liabilities related to earn-out and put and call options.
The short-term financial resources grew by EUR 8 million- EUR 38.3 million, and it's important for us to have, let's say, the power to continue, of course, also in the short term, our, let's say, M&A plan. If we look at the other long-term financial assets, which remain steady as of 31st March 2023 compared to year end 2022, and they consisted of a mark to market of financial loan. If we look at the other liabilities, the non-current financial liabilities, we have EUR 4.8 million of liabilities related to IFRS 16, so mainly buildings, cars and so on, with an increase of EUR 1.1 million.
In the other non-current financial debts, there are mainly the longer, the long-term portion of financial loans and are also included EUR 7 million on long-term liabilities related to earn-outs and put call option liabilities related to the M&A plan implemented in the last years. Non-current financial debts grew by EUR 5.6 million compared to year end of 2022. If we look at the unadjusted cash position instead, the group closed the first quarter of 2023, with a net debt adjusted of EUR 8 million.
The difference between the unadjusted net debt consists of the financial investment held in Banca del Fucino. If we move to the next slide, the balance sheet of the company as of March 31st, 2023 show in terms of fixed asset, a quite steady trend compared to the year end 2022. In terms of intangible asset of EUR 77.5 million, they consist mostly of, let's say, the goodwill coming from the M&A plan of the last four years, which account for approximately EUR 65 million. We have approximately EUR 11 million of goodwill allocated to other intangible asset, mainly to customer relationship, and that sum up to EUR 75 million.
The remaining approximately EUR 2 million consist of for EUR 0.9 million of the investment in the unconsolidated subsidiaries, and for the remaining residual part are included deposits, long-term deposits, and tax assets. If we look at the tangible assets, they remain quite stable compared to the year end 2022, with a EUR 1.2 million increase. Instead, if we look at the other fixed assets of EUR 19.2 million, they includes, of course, the investment in Banca del Fucino, the investment in the subsidiary unconsolidated for EUR 0.9 million at other residual amounts.
Of course, the main component in the investment in Banca del Fucino that in the adjusted cash position is reclassed within the financial assets. Moving to the net working capital, as of March 31st, 2023, the net working capital is equal to EUR 24 million, with a decrease of approximately EUR 13 million compared to the year end of 2022, this is driven by the decrease in the trade receivable, and is mainly related to the seasonability of our, let's say, receivable with our customer. That is one of the main driver of the decrease of the financial debt of the period.
In terms of inventories, it consist mainly of work in progress with for customer projects for which revenues are recognized according to the percentage of completion method. If we look at the trade receivable, as already discussed, we recorded a drop of approximately EUR 16 million. The other high items remain quite steady in the period. As well as severance and other non-current liabilities show a constant trend as of 31st March 2023 compared to the year end of 2022. Shareholder equity show an increase of EUR 1.3 million. It consist of the net result of the period and the effect of the sales and the repurchase of treasury shares.
No changes in the shareholders equity for minority interest, and the net financial position, and the net financial debt decreased by EUR 13 million, EUR 3 and EUR 13.6 million discussed before. If we move to the next slide, we have the shareholder structure as of March 31st, 2023. That shows Laserline, the vehicle of our chairman, Enrico Magni, with a stake of 30% in TXT. We have the managers owning a 16% stake overall in TXT, and the shares are mainly related to share that has been sold during the M&A plan occurring the last three years. We have the markets owning 43% of the TXT, the TXT capital, and Helio Global Asset Management owning a 3% stake in TXT.
We have treasury shares for 7%. The treasury share in particular as of March 31st, 2023, were 960,000, representing 7.38% of the issued shares at an average carrying value of EUR 2.9 per share. In terms of dividends and treasury shares repurchase, in the first quarter of 2023, TXT invested EUR 3.4 million in the repurchase of treasury shares. That means that TXT repurchase 195,000 shares, repurchase at an average price of EUR 17.6 per share. Of course, the dividends have not yet been paid, so it's not included in the graph. The EUR 3.4 million consists fully of the buyback plan.
The dividends are to be paid are equal to EUR 2.2 million, and will be paid later in May. In terms of market data, the share price as of March 31st, 2023, was equal to 19.96%, and the TXT stock reached a peak of 20.9% in the first quarter of the year. Market cap as of March 31st, 2023, was equal to EUR 238 million, and the dividend yield for 2023, calculated on the stock prices of December 31st, 2022, was equal to 1.4%. The dividends approved also by the shareholder meeting, is equal to EUR 0.8 per share, and as already discussed, that will cost TXT approximately EUR 2.2 million.
We are done for the financial section of this conference call. Thank you everyone for your attention. Now is the time for the Q&A. See you later. Thank you again for your attention.
Thank you very much, Andrea. We have received a couple of questions during this meeting, and if any other questions come to mind, please let us know and send them in to us while we are also answering other questions. The first questions come from Andrea Randone. He asks, "Can you confirm the ambition." Oh, one moment.
Another question has appeared.
It disappeared. One moment. Can you confirm the ambition for the current year of reaching an EBITDA margin of 14%?
At least 14%. Yes, we confirm. As I told, the first quarter is always a little bit slower than the rest of the year. Especially we had a good track record in the last part of the year, fourth quarter. First quarter is more a quarter in which, especially for software, let's say the revenues are slower. We confirm our ambition to growth in terms of profitability, thanks to the synergies, of course, optimization of costs, and thanks of course to the revenues that will come from software that are higher marginality with respect to the rest of the business related to services. Confirm.
Okay. The second question also, once again from Andrea, is: Can you help us with a qualitative reconciliation between the old and the new segment reporting?
Yes. In terms of qualitative, let's say the old segmentation was related to the industry, and during the last three years, we had lot of, let's say, influence of others industry segment within the historical one. The FinTech and the aerospace, as you look now to the numbers, are worth the 50% of the overall revenues of the group. Keeping this, let's say, segmentation was not, let's say, good in order to give a true vision of the business as it is. The new segmentation is more related to the offering and for Digital Advisory, Software Engineering, as Smart solution, we have an offering that is cross-industry. It's not. Maybe some industry are more focused for historical reason to one of the division.
Our, let's say, aim is to provide different, so upsell and cross-sell services and products towards the same customers. This is the strategic vision. In order to reconciliate the two of them, we continue to provide a vision also of the old segmentation as the first slide. It's a little bit maybe it's worth to have a follow-up. Many of you meet us during the events also in the stock exchange, we can go deeper. The point is that with the new segmentation we are clustering the business of the companies, of the ecosystem that have the similar business model.
Companies providing Digital Advisory are clustered together with a trend of business model that is very similar also in terms of profitability. Companies that are offering engineering, Software Engineering services are clustered, and we cluster all the companies that instead have a product portfolio. I don't know if I explained too much, and I know Andrea is quite, let's say, sensible about the vision, but I can offer a direct follow-up as soon as possible with Andrea Favini instead, that will explain a little bit better the reconciliation among the two visions.
Okay. Thank you very much, Daniele. Andrea Randone's last question is: What is the EBITDA margin of recently acquired Ennova in the first quarter of 2023?
Is a little bit better than 11%, more or less. Something more.
Our fourth question comes from Nicolo. He didn't leave a surname, so I hope you know who you are.
No, Nicolo.
Nicolo. His question is in regards to Banca del Fucino, and he's asking, when do we think that we will exit the investment, and how much do we believe we will earn?
Okay. As already communicated, we are planning to divest during 2023. Of course, we are not in rush. As you know, at the end of the last year, there was a revision of the fair value of our participation, our shares into the Banca del Fucino that was re-evaluated with an overall value about EUR 16 million against the EUR 14 million that we invested. Correct, Andrea?
Yes, EUR 16.5 million.
Okay. There is already a good gain in terms of fair value. We expect at least to get this money. Okay? Probably there is also an opportunity to do a better gain because the bank is performing well. They provided also the financial results of 2022, last month, I think, so 15 days ago, not so far from now. They are public, so you can reach it on the web. They had a very strong performance in terms of also volumes that are managing and, let's say, net profit. The banking is performing well.
We are not in rush to sell because, you know, as we shown, we have cash and we have also our treasury shares in order to continue our M&A and we have access also to some credit. We plan to do by the year with a good gain, possibly better than the one that is now reached at least on the fair value.
Okay. We've just received a few more questions, once again from Andrea Randone.
Mm-hmm.
He is asking, are we planning an Investor Day in the next months?
Yes, we are planning to do it. We are still defining if to do before summer or just after the summer. We will speak and we will present our vision in three years in this event. It's just a matter of organization, but will be done. Probably before summer, at least, just after the summer.
Now we have another question from a different Andrea. He asks: When will we publish a.
No, which is Andrea without. Our Andrea in Berlin? No.
I don't know.
Uh-uh.
There's no surname.
No.
So
Okay.
He's asking: When will we publish the news or timing regarding the business plan?
It is the same question more or less than the previous one. We are planning to have an Investor Day. still is not defined if, before the summer break or just after, in July or in September.
Okay. We have a question from Alberto Mari, and he's asking: What about the EBITDA margin from Software Engineering, and what is the target after synergies?
Yes. It's a good question also because, you know, when you integrate different companies, there is a potential to make, let's say, improvement also in the marginality. It will be take a little time like we have done in the past. The Software Engineering division is mainly a division related to services around, let's say, software starting from the analysis to the development, so outsourcing of software factory. Quality assurance is a strong value proposition that we have in our portfolio. All this kind of activity are mostly managed as work packages. Our approach is not an approach of time and material consultancy, but is a software engineering approach. We offer customer a fixed price project and provide them with reliable results.
Now today, let's say, our target in general, when we are looking to the three divisions is 15% profitability of Digital Advisory, 20% profitability of Smart Solutions, and for the Software Engineering, the target is 10%-12%. We are already, let's say, in target with our profitability targets. Of course, there is the possibility to improve. Today we have a mix that is driven by more mature business and very, very specialized business like the one that we have in the defense area together with business that is more, let's say, generic. What we are trying to do is to put this approach of, let's say, efficiency in managing fixed price projects in order to improve the profitability.
At the end, it will be, let's say, a good result to arrive towards 15%, but still 10%-12% is a target that we are planning for 2023.
Okay. We have an anonymous question here.
Mm-hmm.
They're asking: What is the 2023 outlook for organic growth? Can we annualize 11%?
We are targeting as a guidance more double digits. 11% we reached in first quarter is a target that let's say we are using as a guidance for the whole year. Okay? depends a lot also on some boost that can come by volumes of software revenues. let's say the guidance of 11% is good to annualize as a guidance. the update will come, but there's a reason that we can keep this pace for the rest of the year.
Okay. Thank you. Another question we have, again, another anonymous question is: Are there any progress on the EUR 50 million possible acquisition to be done in 2023?
It's from anonymous, I cannot ask anonymous to explain a little bit better. I don't know EUR 50 million where comes from. For sure we have communicated that we want to do several other acquisition during 2023. First, let's say, quarter is strange for us because we are doing, let's say, so many extraordinary operations during the year. First quarter was a little bit, let's say, slow with respect to the past that we had done, even if we are working on two main acquisition now, that one of them we are targeting to do. Probably it's difficult that we can do it in Q2. Q3 for sure we will close it if everything is okay.
There is still the full commitment about the management team in order to capture opportunity and close opportunities. We are working hard on it, and the results will come during the year. The commitment is to continue with the similar, let's say, the similar approach that we had in the last year, in the last few years, because there is a lot of interest around, and we are attractive also for mid enterprises, that will join a project of aggregation in value creation, and the ecosystem of TXT is attracting several opportunities.
Okay. Thank you very much. We have another anonymous question going back a bit to organic growth. They're asking: What is the midterm outlook for organic growth on a three-year basis, and can you confirm double digits?
On a three-year basis, as I said before, we will do an Investor Day in order to explain you which is our vision on a three-year plan. Of course, we are working with this, let's say, target in mind. What I can communicate now is confirm what I said before about the 11%, so double-digit growth for 2023. For a more, let's say, comprehensive view in three-year, I ask you to wait for the Investor Day I will share the vision that we have for the next three years.
Okay. We've just found out who the anonymous person is. It is Alberto Mari. All of these anonymous questions have come from him.
Okay. We have a name.
Exactly. He has asked one last question regarding the two new products that we talked about last time. Working capital solutions and the AML software, I believe referring to Faraday and NISC. Are these two starting to contribute?
Goodness. They are contributing. We have to specify if they are contributing with the profits or with volume. Those two products, let's say are the less mature, in particular, working capital is the less one, and the AML, that is Faraday, is instead more mature, already on customer base. I'll go deeper differently for the two of these products. For the AML product related to, let's say, artificial intelligence for Anti-Money Laundering, that is Faraday. We have signed important contracts with the main banking institution, we are still, at least for the first quarter, in a strong phase of investment in order to finalize the platform and integrate the platform within the customer environment. It is quite complex in banking institution, as you may know.
Faraday and the AML part is contributing in terms of volume. Because there are revenues coming from the projects and from the licenses, but still is under heavy investment, is not a breakeven, but not far from the breakeven. The breakeven, according to our plan, is to reach, to be reached in the second half of the year, by the end of the year. For this year they will not contribute in, with a positive boost in terms of profitability, but at least also not as a negative boost. This is the plan. In terms of working capital, instead that is the platform for reverse factoring, we are slower than the initial plan that we had in mind.
We had also, if you look to our, let's say, results of 2022, also reevaluated our put and call option in terms of value because the plan is going slower than we expected when we started to invest. is bringing, yet small revenues and small, let's say, losses. we are still under investment. We did some strategic, let's say, partnership, looking for partners, in terms of ensure the credit. we are working with a broker that will support us and also to add an additional offering for the platform itself, providing insured credit for the factoring that we are providing. Still there is a quite slow, let's say, process in order to bring customers or bring stakeholder within the platform.
At the beginning we were thinking that the onboarding of, let's say, industry, the onboarding of banks within the platform was faster than we actually are facing. Instead this, with respect to the plan that we have for this unit, the profitability, the breakeven is still in 2024. For the 2023, it will contribute with the losses, even investments, so small investments. We are speaking about EUR -1 - EUR -200,000 .
Okay. Thank you very much. We just got one last question from Massimo.
Mm-hmm.
Regarding the Banca del Fucino. He's asking: Do you therefore intend to sell the shares of Banca del Fucino despite the IPO of Fucino Green being planned or are you considering the hypothesis of waiting for the IPO?
Also this was probably already communicated in the past. Of course, one of the exit option of our investment is also the IPO. Because, you know, the IPO is still something that is out of control and can take time, of course, we are monitoring also the IPO as an option of this investment. Depends a lot of the timing of this IPO with respect to our needs of cash in order to continue our plan of M&A. Yes, the IPO is an option.
Okay. Thank you very much, Daniele. I believe those are all of the questions we have received. Should we have any other questions, please get in touch privately and we'll try to reply as soon as possible.
Thank you very much. Thank you, everybody. Have a nice day, and I wait you for the next conference call. We are very committed in order to have another call like this with good results to share with you guys. Thank you, Andrea from Berlin.
Thank you, Daniele. Thank you, everyone.
Ciao, Bridget. Thank you again.
Yeah. Thank you. Bye everybody.
Bye-bye.
Bye.