Ten things we learned from Nexi’s Capital Markets Day

Nexi published a 171 slide deck for its Capital Markets Day. To save you the trouble of ploughing through the whole document, here’s ten things Business of Payments learned from the presentation.

• Nexi says it is the number one Paytech in Europe. The numbers certainly do look impressive: 2.2m merchants, 3.1m terminals managed, €389bn payment volume, €3.0bn revenue and €1.4bn EBITDA in 2021. 

• Market prospects continue to be excellent. Exiting Covid, Nexi forecasts an ongoing 2ppt shift from cash to cards in its core markets, underpinning payment volume growth of 10% CAGR over the next five years. Card penetration in Nexi’s core markets (which exclude Spain, France and UK) is still just 36%. If the trend to electronic money continues, this would give an incremental €600bn available to process over the next five years. 

• Nexi’s financial prospects look good too. The top line is growing and strong operational leverage means the bottom line will look after itself. The company forecasts CAGR through 2025 of 9% for revenues, 14% for EBITDA and 20% for eps.  This takes net revenue from €2.9bn in 2021 to €4.2bn in 2025. The extra €1.3bn revenue is expected to deliver €0.9bn EBITDA. Illustrating the operational leverage, margins grow 900bps to 56%.

• M&A synergies from NETS and SIA are running ahead of plan. €65m additional synergies have already achieved with €365m now expected by 2025. Synergies will run 10% ahead of plan to 2025 and 25% in the long term. The acquisition blitz is not over. Nexi is still looking at inorganic opportunities to consolidate in existing markets and to add extra capabilities in eCommerce and software.

• Merchant solutions is the growth engine. €1.0bn of the €1.3bn total revenue increase will come from merchant solutions. Geographical growth is primarily from Italy €0.5bn and DACH/Poland €0.5bn.

• Nexi claims to be market leader in Italy and Nordics for merchant solutions, number two in Switzerland and Poland, and number 3 in Germany and Sweden. Austria, Greece and Croatia are also key growth markets. 

Nexi market position, source: Nexi Capital Markets Day, October 2022

• Practically, there is not yet a single market for merchant payments. This gives Nexi the space to compete with the global payment giants. In Europe today, there are 150 local payment methods and 10 national debit schemes (together accounting for 50% of payment volume), significant domestic regulations for payment/financial institutions as well as country-specific tax and administrative requirements. This all adds complexity and allows Nexi to differentiate based on local capabilities while benefiting from the scale economies of pan-European backends.

• Nexi is targeting the mid-market for eCommerce which (it says) accounts for 50% of the payment volume but 59% of the revenue pool. Nexi isn’t much interested in large global merchants and market places. These are much less profitable, delivering 44% of market payment volume but just 27% of revenue. eCommerce product strategy is to run local front ends on a single back-office platform complemented by a pan-European integration layer. 

• There is considerable value in owning the full product stack. Adding acquiring to a simple gateway proposition multiplies the take rate by 4 but adding an in-house APM (such Poland’s P24 which is now owned by Nexi) gives a 7x boost.

• Nexi believes that 90% of revenue pool for POS-centric small business merchants is “local by nature.” These customers have a strong preference to buy from local brands recommended by their bank or software suppliers. Nexi is commercialising a flexible “one stop” solution tailored to segment and national needs, partnering with ISVs and investing in domestic distribution. Product strategy is focused on the new Android solution which is said to be performing well and accounts for 8% (but growing fast) of front book sales in Italy, 74% in Germany and 62% in Nordics. Fully digital onboarding is keeping cost per acquisition at under €200 in Italy, still by far Nexi’s largest market.